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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Struthers, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 57-1075246
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Carriage Lane, Bldg. D, Suite G-E, Charleston, SC 29407
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 843-763-1755
------------------------------
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
<PAGE>
ITEM 1. BUSINESS
Description of Business
Latitude Network Inc., a public company, was incorporated in the
State of Nevada on October 10, 1995. On June 8, 1998, it changed its name to
Orbis Development, Inc. ("Orbis"). On June 18, 1998, the then principal
shareholder of Struthers, Inc. acquired a controlling stock position in Orbis,
which on June 18, 1998, amended its Certificate of Incorporation to change its
name to Struthers, Inc. (the "Registrant") and to increase the number of shares
it is authorized to issue from 50 million shares of Common Stock, par value
$.001 to 100 million shares of Common Stock par value $.001. Effective August
25, 1998, the Registrant reverse split its outstanding shares 1,000 for 1 and
effective September 1, 1998 forward split its shares on a 10 for 1 basis. On
September 22, 1998 its Certificate of Incorporation was further amended to
authorize it to issue 900,000,000 shares of Common Stock par value $.001. In
February 2000 the Registrant amended its Certificate of Incorporation to
increase the number of shares it is authorized to issue to 906,520,000 shares of
which 900 million shares are Common Stock and 6,520,000 shares are Preferred
Stock. Neither Latitude nor Orbis did any business.
Commencing in September, 1998 the Registrant worked on developing a
non-surgical porcine embryo transfer and semen implantation technology
(artificial insemination) which is now commercially viable. Embryo transfer is
the ability to remove an embryo from a genetically superior animal and introduce
it into a surrogate host. This has been done in other large animals commercially
but has never been successful in swine due to their intricate physiological
makeup. The Embryo Transfer System is projected to generate gross revenues of
$3,635,000 within the first two years.
The advantages of embryo transfer are: (i) bloodlines are changed
after only one generation; (ii) no quarantine requirements compared with live
animals; (iii) no pathogen transfer, virtually eliminating disease; (iv) reduced
transportation costs; (v) high fertilization rate; and (vi) uses existing
livestock.
Swine industry demands for accelerated genetic advancement will be
met by the safe and cost effective Struthers embryo transfer process and the use
of superior genetics (semen). Embryo transfer and genetic implantation will
become the principal commercial vehicle or genetic sales and exchange in the
swine industry. These technologies will additionally lead the way to new and
innovative breeding strategies for the direct selection of lean high quality
pork. By utilizing the combined benefits of Struthers superior semen genetics
and embryo transfer technology, profitability is increased while the risk of
disease transmission is reduced, ensuring a more profitable bottom line.
On November 2, 1999 the Registrant entered into an agreement with
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred") pursuant to
which the Registrant purchased physical assets, including livestock, heavy
equipment and Legred's rights under agreements with third parties (including one
with Norsvin International AS ("Norsvin"), an international developer and
distributor of porcine genetic materials and technology) ("Legred Assets").
Pursuant to the agreement the Registrant paid Legred the sum of $1 million and
shares of the Registrant's Common Stock, the final
<PAGE>
amount of which shares will be determined by the market value of the
Registrant's shares from time to time. The Registrant was obligated to and did
build a boar stud unit and operating laboratory, the cost of which was
approximately $450,000. In anticipation of the execution of the said agreement,
the Registrant formed a wholly owned subsidiary which was incorporated in the
State of Nevada on October 21, 1999 and called Legred Struthers Genetics, Inc.
All of the Legred Assets were transferred into the subsidiary.
Through its wholly owned subsidiary, Legred Struthers Genetics Inc.
("LSG"), the Registrant's core business is the distribution of products and
services relating to genetic selection and embryo transfers and sale of
genetically superior semen which are designed to increase efficiency and
profitability in the swine industry. The Registrant's focus is to commercialize
the embryo transfer technology and sales of superior semen for the purpose of
disseminating quality genetics into the national and international swine
industry.
The Registrant has entered into swineherd alliance agreements with 12
separate swineherd operators consisting of approximately 23,000 swine to provide
breeding gilts and barrows which will be used to increase the sales of semen,
embryos and gilts, as well as the sale of farm fresh pork products through swine
containing superior genetics resulting in leaner and more tender pork products.
None of these swine will be fed animal protein in their growth diet and great
care is taken against the introduction of any harmful chemicals and unnecessary
antibiotic products.
LSG, under the agreement with Norsvin, will be able to supply seven
superior lines of swine genetics developed over the previous 20 years by
Norsvin. All genetic sales (semen, live animal sales, and embryos) will occur
through LSG.
LSG's stud boar unit located in Bricelyn, Minnesota, with 170 Great
Great Parent boars that produces semen for sale, will be augmented by the
addition of a new state-of-the-art stud boar facility also located in Bricelyn
that will house 400 additional boars. Each boar produces 1,200 doses of semen
per year with the average price per dose of $7.00 this equates to $8,400 in
gross semen sales per boar per year. At full capacity, it is estimated that the
facility will generate $4,788,000 in gross semen sales per year.
Gilt sales (prepubescent breeding sows) will be supplied through our
gilt multiplier system. LSG, through its Norsvin agreement, currently generates
an average of 450 gilt sales per month with the average sale being $195 per
gilt. Projected gross revenues per year in gilt sales is $1,053,000. The
Registrant has plans to greatly expand its gilt multiplier capacity and
finishing capacity to meet demand already being experienced.
Boar and barrow (prepubescent boars) sales are made through the
multiplier system or from the core genetic herd. The average price per boar is
$5,400 with average sales of 3 per month generating gross revenues of $194,000
per year.
2
<PAGE>
Competition
At present, the Registrant must compete with both national and
international companies that are vastly larger in scope and resources. However,
to date, these companies can only provide genetics via live animals and semen.
The Registrant believes that it is the only company in the world to have the
technology to provide genetics through embryo transfer and semen on a commercial
basis.
Trademarks
Currently pending with the U.S. Patent and Trademark Office are
special intent to use applications for the following three trademarks:
TENDERPRIME and TENDURPRIME: These trademarks will be used in
connection with genetically bred swine, namely pigs and hogs, and meat products
derived therefrom; and
PORCINE GENETICS: This trademark will be used in connection with
genetically manipulated semen and embryos of swine.
An "actual use" application has been filed with the U.S. Patent and
Trademark Office for the company logo. The company logo comprises a shield with
the name "Struthers Certified" across the top, a picture of a pig in the middle
and a banner across bottom of the shield.
Employees
Four full-time employees and one part-time employee are located in
the Registrant's administrative offices in Charleston, South Carolina. There are
three full-time employees in the Registrant's research facility in Spencer,
Iowa. In the Registrant's boar stud operations in Wells and Bricelyn, Minnesota
there are eight full-time employees and one part-time employee.
ITEM 2. FINANCIAL INFORMATION
Overview
On November 2, 1999, the Registrant entered into an agreement with
Legred Genetics, Inc., Legred Genetics, and Brent Legred ("Legred") pursuant to
which the Registrant purchased all of the tangible and intangible assets,
including livestock, machinery and equipment and Legred's rights under
agreements with third parties (including one with Norsvin International AS
("Norsvin"), an international developer and distributor of porcine genetic
materials and technology. All of the assets of this purchase were transferred
into the Registrant's wholly owned subsidiary, Legred Struthers Genetics, Inc.
The Registrant's subsidiary will be able to supply seven superior
lines of swine genetics developed over the last twenty years in conjunction with
the top swine genetics company of Norway - Norsvin. The Registrant generates
revenues from genetics through the sale of semen, live animals and embryos.
3
<PAGE>
The Registrant's current stud boar unit, with 170 Great Great Parent
boars that produces semen for sale, will be augmented by the addition of a new
state-of-the art stud boar facility that will house 400 additional boars. The
new facility is expected to be fully operational by April 30, 2000. Each boar
produces 1,200 doses of semen per year, with an average sales price of $7 per
dose. This equates to $8,400 in gross semen available for sale per boar per
year. Once the new facility is at full capacity, the Registrant could generate
approximately $4.8 million in gross semen sales per year. Semen sales for the
two months since the date of acquisition of Legred were $31,074.
Gilt sales (prepubescent breeding cows) will be supplied through the
Registrant's gilt multiplier system. The Registrant currently generates an
average of 450 gilt sales per month with an average sales price of $196 per gilt
gross. Projected gross revenues in gilt sales for 2,000 is approximately $1.05
million. Gilt sales for the two months since the date of acquisition of Legred
were $201,736. The Registrant currently has contracts with twelve gilt
multiplier farms for the production of our superior genetic lines of gilts and
barrows that will be available for sale through our subsidiary. The Registrant
expects these contracts will generate approximately $1.25 million in gross
revenues during 2000.
Boar and barrow (prepubescent boars) sales are also made through the
multiplier system or from the core genetic herd. The average sales price per
boar is $5,400 with average sales of 3 boars per month generating approximately
$194,000 per year. Boar and barrow sales for the two months since the date of
acquisition of Legred were $59,758.
The Registrant is negotiating contracts with several clients to
provide them with isoweaver (early post-weaned animals) pigs that is projected
to generate $4.8 million in gross revenues per year. The Registrant currently
has contracts with two alliance swine production farms for the production of our
superior genetic line of hogs to be sold through Registrant's own line of
value-added, farm- fresh pork products through direct marketing and
institutional sales.
The Registrant currently has alliances with five swine producers for
the rearing of our superior genetic line of hogs for market under Registrant's
specific developed programs in order to fulfill the needs of identified meat
packers. The Registrant will collect a percentage of the premiums paid by meat
packers for hogs from our genetic line from both the Registrant's own herds and
alliance herds. Current premiums paid by meat packers for our top quality hogs
range from $9.00 to $22.00 per hog. Percentages paid to alliance hog producers
vary on a per contract basis, but generally range between $4.00 and $17.00 per
hog. The Registrant has identified several meat packers with needs for certain
types of animals under the Registrant's developed protocols and programs. These
alliances are projected to generate approximately $4.2 million in revenues in
two years based on the Registrant receiving a net royalty of approximately $5.00
per hog. Market sales of hogs for the two months since the date of acquisition
of Legred were $19,895.
The Registrant has perfected the surgical Embryo Transfer System and
is currently improving the procedure to include the non-surgical implantation of
embryos. The Embryo Transfer System is projected to generate gross revenues of
$3.6 million within the first two years of operations.
4
<PAGE>
The following selected supplementary data and the analysis of the
results of operations for the years ended December 31, 1999 and 1998 have been
derived from the Pro Forma Consolidated Financial Statements that reflect the
results of operations as if the Legred acquisition had occurred as of January 1,
1998.
<TABLE>
<CAPTION>
Pro forma (2)
Year Ended December 31, Historical(1)
1999 1998 1999
Operating Revenues:
<S> <C> <C> <C>
Semen $ 175,880 $ 150,233 $ 31,074
Gilts 670,158 732,289 201,736
Boars and Barrows 252,097 341,856 59,758
Market 149,440 198,405 19,895
Accessories 15,805 9,246 14,896
Other 15,352 15,255 5,692
---------- ---------- ----------
Total Operating Revenues $1,278,712 $1,447,284 $ 333,051
---------- ---------- ----------
<FN>
(1) Reflects operating results of the farm operations for the two months since
the date of the Legred acquisition.
(2) Reflects operating results of the farm operations as if the Legred
acquisition had occurred as of January 1, 1998.
</FN>
</TABLE>
Results of Operations
Pro Forma year ended December 31, 1999 compared with the pro forma year ended
December 31, 1998.
The following table sets forth, for the periods indicated, the percentages of
total revenues represented by certain items reflected in the Registrant's
statements of operations and pro forma consolidated statements of operations.
Pro forma
Year ended December 31, Historical (1)
1999 1998 1999
Revenues:
Semen 13.8% 10.4% 9.3%
Gilts 52.4% 50.6% 60.6%
Boars and Barrows 19.7% 23.6% 17.9%
Market 11.7% 13.7% 6.0%
5
<PAGE>
Accessories 1.2% 0.6% 4.5%
Other 1.2% 1.1% 1.7%
------- ------- -------
Total Revenues 100.0% 100.0% 100.0%
Cost of Sales - Farm Operations 70.3% 74.0% 50.0%
------- ------- -------
Gross Profit 29.7% 26.0% 49.1%
------- ------- -------
Expenses:
Marketing and Advertising 4.0% 4.1% 6.1%
General and Administrative 58.1% 26.9% 146.1%
Amortization and Depreciation 73.9% 64.3% 55.1%
------- ------- -------
Total Expenses 136.0% 95.3% 208.3%
------- ------- -------
Operating Loss (106.3%) (69.3%) (159.2%)
Other Income (Loss) (1.2%) (0.0%) (4.9%)
------- ------- -------
Loss Before Income Taxes (107.5%) (69.3%) (164.1%)
Benefit From Income Taxes (36.9%) (25.7%) (62.4%)
Net Loss (70.6%) (43.6%) (101.7%)
------- ------- -------
Revenues
Total revenues decreased by $168,572 (11.6%) from $1,447,284 in 1998
to $1,278.712 in 1999. The decrease in sales was a result of the Registrant's
focus in 1999 on increasing its own breeding herd for the sale of genetic
materials rather than the sale of animals. Gross profit as a percentage of sales
increased from 26.0% in 1998 to 28.7% in 1999.
Cost of Sales - Farm Operations
The cost of sales - farm operations decreased from $1,071,473 in 1998
(74.0% of 1998 sales) to $898,460 in 1999 (70.3% of 1999 sales). The decrease
was proportionate to the decline in sales volume of animals.
Marketing and Advertising Costs
Marketing and advertising costs decreased by $8,719 (14.4%) from
$60,328 in 1998 to $51,609 in 1999. Marketing and advertising costs represented
4.1% of sales in 1998 and 4.0% of sales in 1999.
6
<PAGE>
General and Administrative Costs
General and administrative costs increased by $353,699 (90.8%) from
$389,445 in 1998 to $743,144 in 1999. The increase in general and administrative
costs was attributable to the Registrant's efforts in raising capital,
restructuring its business activities, and seeking a merger candidate. The
majority of the increase represents officers' wages of the parent corporation
and outside consulting, legal and accounting costs.
Amortization and Depreciation
Amortization and depreciation increased by $14,396 (1.5%) from
$930,129 in 1998 to $944,527 in 1999. The increase was due primarily to the
depreciation of fixtures and equipment of the parent corporation's offices and
new farm equipment additions in 1999.
Other Income (Loss)
Other income (loss) for 1999 of $16,344) represented net investment
loss for the year. The Registrant had no investment activity in 1998.
Provision for Taxes
The provision for taxes represents the net tax benefit from operating
losses incurred computed at the expected combined federal and state effective
rate of 38.0% for both 1998 and 1999.
Liquidity and Capital Resources
The Registrant has financed its operations and met its capital
requirements including the acquisition of Legred through the sales of equity
securities during 1999. Legred has historically financed its farm operations and
met its capital requirements primarily through cash flows from operations and
short-term bank financing. Cash flows from operations was a negative $382,823
for the first year of operations in 1999.
Cash used in investing activities was $593,052 in 1999. The
Registrant purchased $138,052 in Property and Equipment and $105,000 was
invested in Struthers Pedigree Herd Corp.
Cash provided by financing activities was $824,757 including $924,757
in net proceeds from common stock offerings during 1999. $100,000 was repaid on
the note payable to Brent Leglred in connection with the acquisition.
7
<PAGE>
At December 31, 1999, the Registrant had a deficiency in working
capital of $1,836,632 including a short-term note payable of $900,000 and
short-term stock obligation payable in stock in connection with the Legred
acquisition of $1,750,000. The Registrant's primary source of liquidity at
December 31, 1999 was $201,160 in cash, $112,649 in accounts receivable, and
$260,000 in inventories of animals available for sale. At December 31, 1999, the
Registrant was committed to the construction of a stud boar facility in the
amount of $450,000. As of the date of this report the Registrant is committed to
the acquisition of two complementary businesses for a total purchase price of
$488,000 in cash plus an amount of securities to be negotiated and issued at a
later date.
The Registrant may in the future pursue additional acquisitions of
businesses, products and technologies, or enter into joint venture arrangements,
that could complement or expand the Registrant's business. Any material
acquisition or joint venture could result in a decrease to the Registrant's
working capital, depending on the amount, timing and nature of the consideration
to be paid.
In February, 2000, the Registrant offered 1,500,000 shares of its
Class A Convertible referred Stock at $1.00 per share. The Registrant received
$1,350,000 in net proceeds from the sale of equity securities. The proceeds were
used to repay the $900,000 note payable to Brent Legred in connection with the
acquisition, $200,000 to complete the construction of the stud boar facility,
and the balance for working capital.
In March, 2000, the Registrant offered 5,000,000 shares of its Class
B Convertible Preferred Stock at $1.00 per share. The expected net proceeds will
be approximately $4,500,000 and will be used primarily for the construction of
additional breeding facilities and working capital needs. To date, the
Registrant has received subscriptions for all 5,000,000 shares of the Class B
Convertible Preferred Stock.
The Registrant believes that existing cash and cash equivalent
balances subsequent to the latest offering of equity securities and the
potential cash flow from operations will satisfy the Registrant's working
capital and capital expenditure requirements for at least the next 12 months.
The Registrant is currently considering various alternatives for obtaining
additional equity or debt financing. Any material acquisitions of complementary
businesses, products, services or technologies could require the Registrant to
obtain such financing. There can be no guarantee that such financing will be
available on acceptable terms, if at all.
ITEM 3. PROPERTIES
Description of Properties
The Registrant maintains its executive offices in approximately 2,200
sq. ft. of space in Charleston, South Carolina pursuant to a lease expiring May
31, 2000, with an option to renew for one year. The monthly lease payments are
approximately $1,600 per month.
8
<PAGE>
The Registrant has a field office containing approximately 1,500 sq.
ft. located in Wells, Minnesota in a building owned by Legred Struthers
Genetics, Inc. The property was purchased on January 21, 2000 for $50,000 and is
subject to a $40,000 first mortgage. The Registrant has an approximately 22,000
sq. ft. facility housing boar stud semen collection and embryo transfer
operating rooms and an administrative office. It is located on 40 acres of
leased land at $1 per year for 99 years located in Bricelyn, Minnesota. Also in
Bricelyn, Minnesota is a 175 boar stud unit facility containing approximately
5,000 sq. ft. under a month to month lease at a rental of $1,000 per month.
The Registrant has two gestation barns, one 1,800 sq. ft. and the
other 2,400 sq. ft. in Spencer, Iowa under a month to month lease at a monthly
rental of $500.
ITEM 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Registrant's Common Stock by each Director, by all
Directors and Officers as a group and by each person known to the Registrant to
be the beneficial owner of more than 5% of the outstanding shares of the
Registrant's Common Stock as of March 31, 2000. Unless other wise indicated,
each of the following persons has sole voting and dispositive power with respect
to the shares which he beneficially owns.
AMOUNT & NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE OF
OF BENEFICIAL OWNER OWNER CLASS
- ------------------- ----- -----
Douglas W. Beatty
President and Director
1 Carriage Lane
Bldg. D, Suite G-E
Charleston, SC 29407 7,146,000 2.09%
Rhett C. Seabrook
Secretary and Director
1 Carriage Lane
Bldg. D, Suite G-E
Charleston, SC 29407 7,246,000 2.09%
Brent Legred
President of Operations of
Legred Struthers Genetics, Inc.
3500 490 Avenue
Bricelyn, Minnesota 56014 8,880,000 2.50%
All Directors and Officers as
a group (3 persons) 23,272,000 6.56%
9
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Registrant are as
follows:
NAME AGE POSITION
---- --- --------
Douglas W. Beatty 40 President and Director
Rhett C. Seabrook 37 Secretary and Director
Brent Legred 37 President of Operations of
Legred Struthers Genetics, Inc.
The following information summarizes the business experience during
at least the past five years of each officer:
Douglas W. Beatty, President, November, 1998 to date, overseeing the
day by day operations of the Registrant, including the development of product
commercialization and reproductive technology and the development of new herd
recovery protocol. In 1991 to November, 1998, was President of Winners's Circle,
Inc., a Charleston, South Carolina, based seminar and training production
company. Hired trained sales staff to promote celebrity speakers and perform
training programs in corporations throughout the country. In addition, developed
marketing plans for corporations launching new innovative products. Running day
to day operations of company programs and business. His educational background
includes B.S. in biology, vertebrate physiology from Trent University and B.S.
(Hon.) in chemotherapy/laboratory biology from University of Toronto, certified
surgical embryo transfer techniques, University of Missouri.
Rhett W. Seabrook, Secretary, November, 1998 to date, responsible for
sales and marketing of Registrant's porcine reproductive biotechnology and
genetics. September, 1997 to November, 1998, Senior Vice President and
co-founder of Future Financial, located in charleston, South Carolina, handling
sales, marketing, advertising and product development. 1996 to 1997 Associate
Manager/co-Owner of Fric's-N-Frac's retail store in Charlotte, North Carolina,
establishing marketing, development and promotional events. 1995 to 1996
Assistant Sales Manager Rhodes Furniture, Charlotte, North Carolina, directed
sales and service and provided sales staff training and motivation. 1991 to 1995
Beverage Director at The Club of Seabrook Island, Seabrook Island, South
Carolina. Managed lounges and banquet operations, including facility event
planning. Received B.S. 1985 from College of Charleston, South Carolina.
Brent Legred, President of Operations, Legred Struthers Genetics,
Inc., February 15, 2000 to present, responsible for sales and marketing of the
seven superior genetic lines of swine, continual genetic development, and all
day-to-day operations associated with Legred Struthers Genetics, Inc., January
1, 1995 to February 14, 2000, President/Founder of Legred Swine Genetics, and
President/CEO of Legred Swine Genetics/Norsvin Inc. responsible for the sales
and marketing of swine genetics including the Norsvin genetic line of superior
swine and all day-to-day operations of both companies. Received a B.S. degree in
Business and Finance from the University of Minnesota in 1984.
10
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
RESTRICTED
NAME AND FISCAL STOCK
PRINCIPAL POSITION YEAR SALARY AWARD(S)
- ------------------ ---- ------ --------
Douglas W. Beatty 1999 $48,000 4,000,000(4)
President and Director(1)
Rhett C. Seabrook 1999 $48,000 4,000,000(4)
Secretary and Director(2)
Brent Legred 1999 -0- -0-
President of Operations
of Legred Struthers
Genetics, Inc.(3)
(3) As of March 1, 2000 Mr. Beatty's annual salary will be $75,000.
(4) As of March 1, 2000 Mr. Seabrook's annual salary will be $75,000.
(5) Mr. Legred did not receive any compensation during the fiscal year
ended December 31, 1999. As of January 1, 2000 his salary will be
$75,000.
(6) The dollar value of these shares based on the closing market price on
the date of their grant is $682,500.
All of the officers and directors are reimbursed for out-of-pocket
expenses incurred in connection with the Registrant's business. So long as the
expenses incurred in connection with the Registrant's business are reasonable in
amount and accounted for to the satisfaction of the Board of Directors, there is
no set limitation on the amount of expenses which may be incurred.
No employees of the Registrant has a written employment contract with
the Registrant. At the present time the Registrant has no retirement, pension,
profit sharing, stock option plan or other similar programs for the benefit of
its employees. There are currently no outstanding options, warrants or rights
granted to any director or officer of the Registrant except that Brent Legred is
entitled to certain shares pursuant to a written agreement with the Registrant
(Item 7 below).
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 2, 1999 the Registrant entered into an agreement with
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred") pursuant to
which the Registrant purchased physical assets, including livestock, heavy
equipment and Legred's rights under agreements with third parties (including one
with Norsvin International AS ("Norsvin"), an international developer and
11
<PAGE>
distributor of porcine genetic materials and technology) ("Legred Assets").
Pursuant to the agreement the Registrant paid Legred the sum of $1 million and
shares of the Registrant's Common Stock, the final amount of which shares will
be determined by the market value of the Registrant's shares from time to time.
The Registrant was obligated to and did build a boar stud unit and operating
laboratory, the cost of which was approximately $450,000. In anticipation of the
execution of the said agreement, the Registrant formed a wholly owned subsidiary
which was incorporated in the State of Nevada on October 21, 1999 and called
Legred Struthers Genetics, Inc. All of the Legred Assets were transferred into
the subsidiary. Further and pursuant to the agreement Legred became President of
Operations of Legred Struthers Genetics, Inc. at an annual salary of $75,000.
With the exception of the foregoing, there are no transactions with
management nor business relationships or transactions with promoters which are
required to be reported under this item. There is no indebtedness owed by
management to the Registrant.
ITEM 8. LEGAL PROCEEDINGS
The Registrant is not a party to any material pending lawsuits, nor
have any been threatened and to the best of its knowledge, none are
contemplated. No such proceedings are known by the Registrant to be contemplated
by any governmental authority.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDERS MATTERS
The Common Stock commenced trading on the OTC Bulletin Board on June
16, 1998 under the symbol "STRU". The following table sets forth, for the fiscal
periods indicated, the high and low bid prices of a share of Common Stock as
reported by the OTC Bulletin Board for periods on and subsequent to June 16,
1998. Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
High Low
Fiscal Year 1998
3rd quarter 6.37 .09
4th quarter .062 .015
Fiscal Year 1999
1st quarter .03 .01
2nd quarter .60 .01
3rd quarter .28 .09
4th quarter .52 .072
Fiscal Year 2000
1st quarter 1.656 .27
12
<PAGE>
As of March 31, 2000 there were approximately 1,574 holders of record of the
Common Stock.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Since November 1998 Registrant has made the following sales of
unregistered securities, all of which sales were exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act) pursuant to
Section 3(b) thereof or as otherwise indicated herein.
In November, 1998 the Registrant sold 22 million shares of Common
Stock in 176 units at $5 per unit (each unit consisting of 125 shares) (or $.04
per share) for a total of $880,000. The proceeds of this offering, less sales
commissions, if any, and sales expenses of the offering were applied to market
development, commercialization of embryo transplant technology and working
capital.
The Registrant believes that such issue and sale was exempt from
registration pursuant to Section 3(b) of the Act and/or Rule 504 under
Regulation D promulgated thereunder.
In November 20, 2000, Registrant sold 1,500,000 shares of Class A
Convertible Preferred Stock ("Class A Stock") to an accredited investor, at a
price of $1 per share. Each share of Class A Stock is convertible at the option
of the holder into fully paid and non-assessable shares of common Stock as
follows: commencing on the first day of the sixth month following the issuance
of Class A Stock ("Conversion Period") and on the first day of each sixth month
period thereafter, for a total of six Conversion Periods, one-sixth (1/6) of the
shares of Class A Stock held may be converted by each holder thereof. The amount
of common shares into which the Class A Stock shall be converted at each
Conversion Period shall be as follows: at each of the six Conversion Periods the
amount of Class A Stock shares which may be converted shall be divided by the
average market value between the bid and asked price of the Registrant's shares
during the ten day trading period immediately preceding the date of such
Conversion Period, but not more than $.40, and the resultant figure multiplied
by three. The proceeds of this offering were applied to the purchase of the
Legred Assets (see Item 7), completion of boar stud unit and working capital.
The Registrant believes that the sale of such securities was exempt
from registration pursuant to Section 3(b) and/or 4(2) of the Act or under
Regulation D promulgated thereunder.
In March, 2000, Registrant sold 5,000,000 shares of Class B
Convertible Stock ("Class B Stock") to an accredited investor, at a price of $1
per share. Each share of Class B Stock is convertible at the option of the
holder into fully paid and non-assessable shares of Common Stock as follows:
commencing on the first day of the sixth month following the issuance of Class B
Stock ("Conversion Period") and on the first day of each sixth month period
thereafter, for a total of six Conversion Periods, one-sixth (1/6) of the shares
of Class B Stock held may be converted by each holder thereof. The amount of
common shares into which the Class B Stock shall be converted at each Conversion
Period shall be as follows: at each of the six Conversion Periods the amount of
Class B Stock shares which may be converted shall be divided by the average
13
<PAGE>
market value between the bid and asked price of the Registrant's shares during
the ten day trading period immediately preceding the date of such Conversion
Period, but not more than $.40 , and the resultant figure multiplied by three.
The proceeds of this offering were applied to expansion of physical facilities,
equipment, R and D, acquisitions and working capital.
The Registrant believes that the sale of such securities was exempt
from registration pursuant to Section 3(b) and/or 4(2) of the Act or under
Regulation D promulgated thereunder.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Registrant is authorized to issue 900,000,000 shares of Common
Stock, par value $.001, of which 354,677,550 shares are issued and outstanding.
Each outstanding share is entitled to one vote in all matters. Subject to the
preferential rights of the Preferred stock (if any), holders of Common Stock
have equal ratable rights to dividends as and when they may be declared by the
Board of Directors, out of any funds of the Registrant legally available for the
payment of such dividends. Upon any liquidation, dissolution or winding up of
the Registrant, whether voluntary or involuntary, the remaining net assets of
the Registrant shall, after payment in full of the liquidation preference of any
Preferred Stock, be distributed pro rata to the holders of the Common Stock and
the Preferred Stock on an "as if converted" basis. The Common Stock does not
have any preemptive rights and is fully paid and nonassessible when issued.
In addition to the outstanding common shares, the Registrant is
registering the common shares underlying the Class A and Class B Convertible
Preferred Stock on an "as if converted" basis. See Item 10 for the conversion
rights of the Preferred Stock.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada law enables a corporation to indemnify any director and
officer who is made a party to any suit or proceeding, whether civil, criminal,
administrative or investigative brought against such person by having acted in
its capacity as such director or officer providing such director or officer had
acted in good faith and in a manner reasonably believed to be in the best
interest of the corporation and with respect to any criminal action, where such
director or officer had no reasonable cause to believe its conduct was unlawful.
The Registrant's Articles of Incorporation include the following language:
No director or officer of the corporation shall be personally liable to the
corporation of any of its stockholders for breach of fiduciary duty as a
director of officer involving any act or omission of any such director or
officer provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director or officer for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article of the Stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts or
omissions prior to such repeal or modification.
14
<PAGE>
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data for the Registrant
are set forth in Item 15 hereof beginning on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrant has no disagreements with any accountants on
accounting and financial disclosures to report under this item, nor has it ever
had any disagreements.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(g) Financial Statements and Supplementary Data.
(h) Exhibits
15
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Independent Auditors' Report F-2
Consolidated Balance Sheets at December 31, 1999 and 1998 F-3
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 1999 and 1998 F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 F-6 to F-7
Notes to the Consolidated Financial Statements F-8 to F-15
Pro Forma Consolidated Financial Statements F-16 to F-18
Combined Financial Statements of Legred Genetics, Inc. and
Brent Legred F-19 to F-27
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholders
Struthers, Inc. and Subsidiary
Charleston, South Carolina
We have audited the accompanying consolidated balance sheets of
Struthers, Inc. and Subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of changes in stockholders' equity, operations and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Struthers, Inc. and Subsidiary as of December 31, 1999 and 1998 and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
Rotenberg & Company, LLP
Rochester, New York
March 17, 2000
F-2
<PAGE>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------
December 31, 1999 1998
- ------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 201,160 $ 2,278
Accounts Receivable 112,649 --
Investment 80,000 --
Inventory 260,000 --
Prepaid Expenses 7,376 --
Deferred Tax Assets 209,000 --
- ------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 870,185 2,278
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 2,408,906 --
Intangible Assets - Net of Accumulated Amortization 2,278,400 --
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 5,557,491 $ 2,278
- ------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 56,817 $ --
Note Payable- Legred Acquisition 900,000 --
Stock Payable- Legred Acquisition 1,750,000 --
- ------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,706,817 --
Long-Term Portion of Stock Payable- Legred Acquisition 2,000,000 --
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,706,817 --
- ------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock - $.001 Par; 900,000,000 Shares Authorized;
340,017,550 Shares Issued and Outstanding 340,017 25,000
Preferred Stock- $.001 Par; 6,520,000 Shares Authorized -- --
Additional Paid-in Capital 874,460
2,220
Deficit (363,803) (24,942)
- ------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 850,674 2,278
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,557,491 $ 2,278
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL TOTAL
PAR COMMON PAID-IN STOCKHOLDERS'
SHARES VALUE STOCK CAPITAL DEFICIT EQUITY
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE - JANUARY 1, 1997 -- $ -- $ -- $ -- $ -- $ --
Issuance of Common Stock in Connection
with Recapitalization 25,000,000 0.001 25,000 2,220 -- 27,220
Net Loss -- -- -- -- (24,942) (24,942)
-
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE - JANUARY 1, 1999 25,000,000 $0.001 $ 25,000 $ 2,220 $(24,942) $ 2,278
Issuance of Common Stock
for Cash 312,797,550 0.001 312,797 611,960 -- 924,757
Issuance of Common Stock in Connection
with Acquisition of Subsidiary 2,220,000 0.001 2,220 247,780 -- 250,000
Capital Contributed in Form of Services -- -- -- 12,500 -- 12,500
Net Loss -- -- -- -- (338,861) (338,861)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999 340,017,550 $0.001 $ 340,017 $ 874,460 $ (363,803) $ 850,674
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C>
Sales $ 327,359 $ --
Other Income 5,692 --
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 333,051 --
COSTS AND EXPENSES
Farm Operations 169,609 --
- --------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 163,442 --
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Marketing and Advertising 20,242 --
General and Administrative 489,838 24,942
Amortization and Depreciation 183,746 --
- --------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 693,826 24,942
- --------------------------------------------------------------------------------------------------------------------
LOSS BEFORE OTHER INCOME AND (EXPENSES) (530,384) (24,942)
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND (EXPENSES)
Interest 8,656 --
Loss on Investment (25,000) --
- --------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME AND (EXPENSES) (16,344) --
- --------------------------------------------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (546,728) (24,942)
Benefit from Income Taxes (207,867) --
- --------------------------------------------------------------------------------------------------------------------
NET LOSS $ (338,861) $ (24,942)
- --------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 340,017,550 25,000,000
- --------------------------------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.001) $ (0.001)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $ (338,861) $ (24,942)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization and Depreciation 183,746 --
Loss on Investment 25,000 --
Capital Contribution - Services Rendered 12,500 --
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (110,649) --
Prepaid Expenses (2,376) --
Deferred Tax Assets (209,000) --
Accounts Payable 56,817 --
- -----------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (382,823) (24,942)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (138,052) --
Purchase of Investments (105,000) --
- -----------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (243,052) --
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 924,757 27,220
Repayment of Note Payable - Legred Acquisition (100,000) --
- -----------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 824,757 27,220
- -----------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 198,882 2,278
Cash and Cash Equivalents - Beginning of Year 2,278 --
- -----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 201,160 $ 2,278
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
STRUTHERS INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
- -------------------------------------------------------------------------------------------
For the Year Ended December 31, 1999
- -------------------------------------------------------------------------------------------
ACQUISITION OF SUBSIDIARY IN EXCHANGE FOR CASH AND STOCK
ASSETS ACQUIRED:
<S> <C>
Inventory $ 260,000
Breeding Animals 2,160,000
Goodwill 2,000,000
Customer List 304,000
Real Estate 200,000
Property And Equipment 69,000
Contracts 5,000
Accounts Receivable 2,000
- --------------------------------------------------------------------------------------------
5,000,000
LIABILITIES INCURRED:
Stock Payable (3,750,000)
Note Payable (900,000)
- --------------------------------------------------------------------------------------------
CASH PAID AND STOCK ISSUED $ 350,000
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-7
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - THE COMPANIES
The Company was incorporated in the State of Nevada on October 10,
1995 as Latitude Network Inc. On June 1, 1998, the Company changed
its name to Orbis Development, Inc. ("Orbis"). On June 18, 1998,
the then principal shareholders acquired a controlling stock
position in Orbis, which on June 18, 1998, amended its Certificate
of Incorporation to change its name to Struthers, Inc. and to
increase the number of shares it was authorized to issue from 50
million shares to 100 million shares. The Company further amended
its Certificate of Incorporation on September 22, 1998 to authorize
it to issue 900 million shares of its common stock. In February
2000 the Company again amended its Certificate of Incorporation to
increase the number of shares it was authorized to issue to
906,520,000 shares of which 900 million are Common Stock and
6,520,000 shares are Preferred Stock.
On November 2, 1999, the Company entered into an agreement with
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred")
pursuant to which the Company purchased all of the tangible and
intangible assets, including livestock, machinery and equipment,
and Legred's rights under agreements with third parties (including
one with Norsvin International AS, an international developer and
distributor of porcine genetic materials and technology). Pursuant
to the agreement, the Company is to pay Legred the sum of $1
million in cash and $4 million worth of common shares of the
Company, which the final number of shares will be determined by the
market value of the Company's shares from time to time. The Company
was obligated and subsequently did build a boar stud unit and
operating laboratory, the cost of which was approximately $450,000.
In anticipation of the execution of the agreements in connection
with this acquisition, the Company formed a wholly owned
subsidiary, which was incorporated in the State of Nevada on
October 21, 1999, called Legred Struthers Genetics, Inc. All of the
assets purchased pursuant to this acquisition were transferred into
the subsidiary.
The acquisition has been accounted for under the purchase method of
accounting. Under purchase accounting, the total purchase price is
allocated to the tangible and intangible assets and liabilities of
Legred Genetics, Inc., Legred Genetics and Brent Legred ("Legred")
based upon their respective fair values based upon valuations and
other studies. Operating activity of the subsidiary is reflected in
the accompanying financial statements from the date of acquisition
(November 2, 1999 through December 31, 1999.)
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is an agricultural producer principally involved in the
breeding and delivery of swine and swine genetics using advanced
reproductive techniques throughout the industry. The Company sells
primarily to producers in North America and worldwide. The Company
disseminates its genetics through the sale of live animals in the
form of gilts, barrows, and boars; semen sales from boar studs; and
embryo sales using our non-surgical "Embryo Transfer System".
The Company maintains its corporate offices in Charleston, South
Carolina and operates its field office including its operating
laboratory and stud boar facility in Bricelyn, Minnesota. In
addition the Company operates a research facility in Spencer, Iowa.
- continued -
F-8
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Struthers, Inc. and its wholly owned subsidiary, Legred Struthers
Genetics, Inc. All significant inter-company balances and
transactions have been eliminated in the consolidation.
SEGMENT DATA, GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS
The Company does business primarily in North America. The Company
also has an agreement with Norsvin, AS (a Norwegian Company) to
sell its product lines. The Company was assigned the rights under
the contract through its subsidiary, Legred Struthers Genetics,
Inc. via the acquisition of Legred Genetics, Inc. The agreement
provides for royalties of 4% to be paid to Norsvin, AS on all sales
of its product lines. The duration of the agreement is for an
indefinite period but can be terminated by either party upon a
twelve month written notice. Forty-one percent (41%) of the
Company's revenues since the date of the Legred acquisition
(November 2, 1999) through December 31, 1999 were sales of the
Norsvin, AS product lines.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially expose the Company to
significant concentrations of credit risk consist principally of
bank deposits, temporary investments and accounts receivable. Cash
is placed primarily in high quality short-term interest bearing
financial instruments and may periodically exceed federally insured
amounts. The Company performs ongoing credit evaluations of its
customers' financial condition. An allowance for uncollectible
accounts receivable is maintained based upon the expected
collectibility of all accounts receivable.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expense during the reporting
period. Actual results can differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less.
INVENTORIES
Swine inventories are stated at the lower of cost (first-in,
first-out method) or market. Costs of raised swine include
proportionate costs of breeding, including depreciation of the
breeding herd, plus the costs of maintenance to maturity. Purchased
swine are carried at purchase cost plus cost of maintenance to
maturity.
F-9
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Breeding animals are
carried at purchase costs or inventory transfer amounts equal to
the lower of accumulated animals maintenance costs or market.
Renewals and improvements are capitalized. Costs of maintenance and
repairs that do not improve or extend asset lives are charged to
expense. Depreciation is provided on the straight-line basis over
the estimated productive useful lives of the assets as follows:
Buildings and Improvements 10 Years
Machinery and Equipment 7 Years
Breeding Herds 3 Years
Vehicles 5 Years
Office Furniture and Fixtures 5 Years
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price over the fair
value of the net assets of acquired companies and is being
amortized on a straight line basis over 15 years based on its
estimated useful life. Acquired intangibles consist of customer
lists and are also amortized over their 15 year estimated useful
life.
LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. The Company
evaluates any possible impairment of long-lived assets using
discounted future cash flows. When required, impairment losses on
assets to be held and used are recognized based on the fair value
of the asset. Long-lived assets to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.
INCOME TAXES
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and
liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to the
period in which the deferred tax assets and liabilities are
expected to be realized or settled as prescribed in FASB Statement
No. 109, ACCOUNTING FOR INCOME TAXES. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
BASIC EARNINGS PER SHARE
Basic earnings per share of common stock were computed by dividing
income available to common shareholders by the weighted-average
number of shares outstanding for the year. Diluted earnings per
share are not presented because the Company has not issued any
potentially dilutive convertible securities as of December 31,
1999.
F-10
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C - INVESTMENT
Investment consisted of the following:
-------------------------------------------------------------------
December 31, 1999 1998
-------------------------------------------------------------------
Investment in Struthers Pedigree Herd Corp. $ 105,000 $--
Less: Loss on Investment 25,000 --
-------------------------------------------------------------------
Investment $ 80,000 $--
-------------------------------------------------------------------
In March 2000, the Company negotiated to sell its equity ownership
back to Struthers Pedigree Herd Corp. for $80,000 in cash.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
-------------------------------------------------------------------
December 31, 1999 1998
-------------------------------------------------------------------
Buildings and Improvements $ 200,000 $--
Machinery and Equipment 69,000 --
Breeding Herds 2,160,000 --
Vehicles 30,000 --
Office Furniture and Fixtures 14,437 --
-------------------------------------------------------------------
$2,473,437 $--
Less: Accumulated Depreciation 158,146 --
-------------------------------------------------------------------
Construction in Progress 93,615 --
-------------------------------------------------------------------
Property and Equipment - Net $2,408,906 $--
-------------------------------------------------------------------
Included in construction in progress at December 31, 1999 are
deposits made to construct a new boar stud facility at the
Bricelyn, Minnesota location. The total estimated cost of
construction is approximately $450,000 and is expected to be
operational by April 2000. Also included is a deposit to acquire an
existing structure at the Minnesota location from an independent
third party. The total purchase price was $50,000 and the
acquisition was completed in January 2000 and financed by securing
a first mortgage on the property in the amount of $40,000.
Depreciation expense has not been recorded on these transactions
since the property was not placed in service as of December 31,
1999.
Depreciation charged against operations was $158,146 and $0 for the
years ended December 31, 1999 and 1998, repectively.
F-11
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE E - INTANGIBLE ASSETS
Intangible assets recorded on the Legred acquisition consisted of
the following:
-------------------------------------------------------------------
December 31, 1999 1998
-------------------------------------------------------------------
Goodwill $ 2,000,000 $--
Customer Lists 304,000 --
-------------------------------------------------------------------
$ 2,304,000 $--
Less: Accumulated Amortization (25,600) --
-------------------------------------------------------------------
Intangible Assets - Net $ 2,278,400 $--
-------------------------------------------------------------------
Amortization charged against operations for the years ended
December 31, 1999 and 1998 was $25,600 and $0, respectively.
NOTE F - PROVISION FOR INCOME TAXES
The provision for income taxes is attributable to:
-------------------------------------------------------------------
Years Ended December 31, 1999 1998
-------------------------------------------------------------------
Income (Loss) Before Provision for
Income Taxes $(546,728) $(24,942)
-------------------------------------------------------------------
State Income Tax $ 1,133 $ --
-------------------------------------------------------------------
Deferred Tax Benefits $(209,000) $ --
-------------------------------------------------------------------
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before
provision for taxes. The sources and tax effects of the differences
are as follows:
-------------------------------------------------------------------
Years Ended December 31, 1999 1998
-------------------------------------------------------------------
Income Tax at the Federal Statutory
Rate of 35% $(191,355) $--
Effect of Graduated Tax Rates 16,888 $--
State Income Tax, Net of Federal Benefit (33,400) $--
-------------------------------------------------------------------
Benefit from Income Tax $(207,867) $--
-------------------------------------------------------------------
As of December 31, 1999 the company has net operating loss
carryforwards of approximately $530,384 for tax purposes which will
be available to offset future taxable income.
The Company's income tax provision was computed based on the
federal statutory rate, reduced by the effect of graduated tax rate
and the average state statutory rates, net of related federal
benefit.
F-12
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE G - COMMON STOCK
The Company's securities are not registered under the Securities
Act of 1933 and, therefore, the stockholders may not sell,
transfer, pledge or otherwise dispose of the common shares of the
company in the absence of either an effective registration
statement covering said shares under the 1933 Act and relevant
state securities laws, or an opinion of counsel that registration
is not required under the Act or under the securities laws of any
such state.
The Company raised capital during 1999 through offerings exempt
from registration pursuant to Regulation D and Sections 3(b) and or
4(2) of the Securities Act of 1933. The Company issued 312,797,550
shares of its common stock for $924,757 in cash during 1999.
NOTE H - PREFERRED STOCK
The Company has 6,520,000 shares of preferred stock authorized of
which no shares were issued as of December 31, 1999. The Company
has designated 1,500,000 shares as Class A Convertible Stock
("Class A Stock") and 5,000,000 shares as Class B Convertible Stock
("Class B Stock"). Each share of Class A Stock and Class B Stock
carries a number of votes equal to the number of shares of Common
Stock then issuable upon its conversion into Common Stock.
Each share of Class A Stock and Class B Stock is convertible at the
option of the holder into fully paid and non-assessable shares of
common stock as follows: on the first day of the sixth month
following the issuance of the Class A Stock ("Conversion Period")
and on the first day of each sixth month period thereafter, for a
total of six Conversion Periods, one-sixth of the shares of the
Class A Stock may be converted by each shareholder thereof. The
amount of common shares into which the Class A Stock may be
converted at each Conversion Period shall be as follows: at each of
the six Conversion Periods the amount of the Class A Stock shares
which may be converted shall be divided by the average market value
between the bid and asked price of the Company's common shares
during the ten day trading period immediately preceding the date of
such Conversion Period, but not more than $.40, and the resultant
figure multiplied by three.
In the event of any liquidation, dissolution or winding up of the
Company, a merger or consolidation of the Company in which its
shareholders do not retain a majority of the voting power in the
surviving corporation, or a sale of all or substantially all of the
Company's assets, the holders of the Class A Stock will be entitled
to receive an amount equal to the original purchase price per share
for the Class A Stock plus an amount equal to all declared but
unpaid dividends thereon (the "Preference Amount"). After the full
liquidation preference has been paid on all outstanding shares of
the Class A Stock, the holders of the Class B Stock will be
entitled to receive an amount computed in the same manner. After
the full liquidation preference on all outstanding shares of the
Class B Stock has been paid, any remaining funds and assets of the
Company legally available for distribution to shareholders will be
distributed pro rata among the holders of the Preferred Stock and
the Common Stock on an "as converted" basis.
F-13
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE I - SUBSEQUENT EVENTS
In February 2000, the Company offered for sale and issued 1,500,000
shares of the Class A Preferred Stock at $1.00 per share. The
Company received net proceeds from the sale of $1,350,000 which was
used to repay a $900,000 short-term note payable to Brent Legred in
connection with the Legred acquisition, $200,000 to complete the
construction of a new stud boar facility, and the balance for
working capital.
In March 2000, the Company offered for sale 5,000,000 shares of the
Class B Preferred Stock at $1.00 per share. As of the date of this
report the Company has received subscriptions for all 5,000,000
shares. The net proceeds from the offering are to be used primarily
for the construction of additional breeding facilities and working
capital, as outlined in the subscription agreement.
NOTE J - PRO FORMA FINANCIAL INFORMATION
On November 2, 1999, the Company entered into an agreement with
Legred Genetics, Inc., Legred Genetics, and Brent Legred ("Legred")
pursuant to which the Company purchased all of the tangible and
intangible assets, including livestock, machinery and equipment,
and Legred's rights under agreements with third parties (including
one with Norsvin International AS, an international developer and
distributor of porcine genetic materials and technology). Pursuant
to the agreement the Company is to pay Legred the sum of $1 million
in cash and $4 million worth of common shares of the Company, which
the final number of shares will be determined by the market value
of the Company's shares from time to time. The Company was
obligated and subsequently did build a boar stud unit and operating
laboratory, the cost of which was approximately $450,000. In
anticipation of the execution of the agreements in connection with
this acquisition, the Company formed a wholly owned subsidiary,
which was incorporated in the State of Nevada on October 21, 1999,
called Legred Struthers Genetics, Inc. All of the assets purchased
pursuant to this acquisition were transferred into the subsidiary.
The acquisition has been accounted for under the purchase method of
accounting. Under purchase accounting, the total purchase price is
allocated to the tangible and intangible assets and liabilities of
Legred Genetics, Inc. and Brent Legred ("Legred") based upon their
respective fair values as of the closing date based upon valuations
and other studies.
The accompanying Unaudited Pro Forma Consolidated Financial
Statements of Operations and Cash Flows for the years ended
December 31, 1999 and 1998 assume that the acquisition of Legred
took place on January 1, 1998, the beginning of the Company's
fiscal year. The Pro Forma Consolidated Statements of Operations do
not include the effect of any non-recurring write-offs directly
attributable to the acquisition. The Pro Forma Financial Statements
do not reflect any anticipated cost savings from the Legred
acquisition, or any synergies that are anticipated to result from
the transaction, and there can be no assurances that any such cost
savings or synergies will occur. The Pro Forma Financial Statements
do not purport to be indicative of the results of operations of the
Company that would have actually been obtained had such transaction
been completed as of the assumed date and for the periods
presented, or which may be obtained in the future. The Pro Forma
financial statements should be read in conjunction with the
separate historical financial statements of Struthers and Legred
and the notes thereto and "Management's Discussions and Analysis of
Financial Condition and Results of Operations".
F-14
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE J - PRO FORMA FINANCIAL INFORMATION - CONTINUED
The purchase price and allocation of the purchase price in excess
of the net assets acquired as a result of the acquisition is as
follows:
-------------------------------------------------------------------
Purchase Price:
Cash Paid on Signing of Agreement $ 100,000
Cash Balance Payable Over 18 Months -
Paid in Full in February 2000 900,000
Fair Value of Stock Issued at Closing:
Unrestricted Shares - 1,000,000 Shares
@ Approximately $.1126 112,000
Restricted Shares - 2,220,000 Shares
@ Approximately $.1126 138,000
Balance of Purchase Price Payable in
Common Shares Over 18 Months 3,750,000
-------------------------------------------------------------------
Total Purchase Price $5,000,000
-------------------------------------------------------------------
Allocation of Purchase Price to Fair Value of net Assets Acquired
Working Capital $ 7,000
Building and Improvements 200,000
Machinery and Equipment 69,000
Breeding Herd:
100 Boars 540,000
300 Sows 1,620,000
-------------------------------------------------------------------
Total Breeding Herd 2,160,000
Inventory - 2,600 Growing Pigs 260,000
Customer List 304,000
Goodwill 2,000,000
-------------------------------------------------------------------
Total $5,000,000
Less: Net Book Value of Assets Acquired 207,096
-------------------------------------------------------------------
Increase to Fair Value $4,792,904
-------------------------------------------------------------------
F-15
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
LEGRED GENETICS, INC.
BRENT LEGRED
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
For The Year December 31, 1999
HISTORICAL
COMBINED
LEGRED GENETICS (UNAUDITED)
STRUTHERS, INC. INC. AND PRO FORMA PRO FORMA
& SUBSIDIARY BRENT LEGRED COMBINED ADJUSTMENTS CONSOLIDATED
------------ ------------ -------- ----------- ------------
REVENUE
<S> <C> <C> <C> <C> <C>
Sales $ 327,359 $ 936,001 $ 1,263,360 $ -- $ 1,263,360
Other Income 5,692 9,660 15,352 15,352
- ----------------------------------------------------------------------------------------------------------
333,051 945,661 1,278,712 -- 1,278,712
Cost of Goods Sold 169,609 728,851 898,460 -- 898,460
- ----------------------------------------------------------------------------------------------------------
GROSS PROFIT 163,442 216,810 380,252 -- 380,252
- ----------------------------------------------------------------------------------------------------------
EXPENSES
Marketing and Advertising 20,242 31,367 51,609 -- 51,609
General and Administrative 489,838 253,306 743,144 -- 743,144
Amortization and (1) 105,400
Depreciation 183,746 55,381 239,127(2) 600,000 944,527
Interest -- 29,765 29,765(3) (29,765) --
- ----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 693,826 369,819 1,063,645 675,635 1,739,280
- ----------------------------------------------------------------------------------------------------------
LOSS BEFORE OTHER INCOME(EXPENSE) (530,384) (153,009) (683,393) (675,635) (1,359,028)
- ----------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest Income 8,656 -- 8,656 -- 8,656
Loss on Investment (25,000) -- (25,000) -- (25,000)
- ----------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME(EXPENSE) (16,344) -- (16,344) -- (16,344)
- ----------------------------------------------------------------------------------------------------------
Loss Before Income Taxes (546,728) (153,009) (699,737) (675,635) (1,375,372)
Benefit from Income Taxes (207,867) 6,320 (201,547) (270,254) (471,801)
- ----------------------------------------------------------------------------------------------------------
NET LOSS $ (338,861) $ (159,329) $ (498,190) $ (405,381) $ (903,571)
- ----------------------------------------------------------------------------------------------------------
<FN>
Notes and Assumptions:
(1) Amortization expense has been calculated on intangible assets to
reflect The retroactive effect of the Legred transaction occurring on
January 1, 1998.
(2) Depreciation expense has been calculated on the increase in Property
and Equipment assets to reflect the retroactive effect of the Legred
transaction occurring on January 1, 1998.
(3) Interest expense would not have been incurred had the acquisition
occurred as of January 1, 1998 since the loans were repaid with the
sale proceeds.
</FN>
</TABLE>
F-16
<PAGE>
STRUTHERS, INC. AND SUBSIDIARY
LEGRED GENETICS, INC.
BRENT LEGRED
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
For The Year December 31, 1998
HISTORICAL
COMBINED
LEGRED GENETICS (UNAUDITED)
STRUTHERS INC. INC. AND PRO FORMA PRO FORMA
& SUBSIDIARY BRENT LEGRED COMBINED ADJUSTMENTS CONSOLIDATED
------------ ------------ -------- ----------- ------------
REVENUE
<S> <C> <C> <C> <C> <C>
Sales $ -- $ 1,432,029 $ 1,432,029 $ -- $ 1,432,029
Other Income -- 15,255 15,255 -- 15,255
- -------------------------------------------------------------------------------------------------------
-- 1,447,284 1,447,284 -- 1,447,284
Cost of Goods Sold -- 1,071,473 1,071,473 -- 1,071,473
- -------------------------------------------------------------------------------------------------------
GROSS PROFIT -- 375,811 375,811 -- 375,811
- -------------------------------------------------------------------------------------------------------
EXPENSES
Marketing and Advertising -- 60,328 60,328 -- 60,328
General and Administrative 24,942 364,503 389,445 -- 389,445
Amortization and (1) 130,000
Depreciation -- 50,129 50,129 (2) 750,000 930,129
Interest -- 11,500 11,500 (3) (11,500) --
- -------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 24,942 486,460 511,402 868,500 1,379,902
- -------------------------------------------------------------------------------------------------------
Loss Before Income Taxes (24,942) (110,649) (135,591) (868,500) (1,004,091)
Benefit from Income Taxes -- 704 704 (372,781) (372,077)
- -------------------------------------------------------------------------------------------------------
NET LOSS $ (24,942) $ (111,353) $ (136,295) $ (495,719) $ (632,014)
- -------------------------------------------------------------------------------------------------------
<FN>
Notes and Assumptions:
(1) Amortization expense has been calculated on intangible assets to
reflect the retroactive effect of the Legred acquisition occurring on
January 1, 1998.
(2) Depreciation expense has been calculated on the increase in Property
and Equipment assets to reflect the retroactive effect of the Legred
transaction occurring on January 1, 1998.
(3) Interest expense would not have been incurred had the Legred
acquisition occurred as of January 1, 1998 since the loans were repaid
with the sale proceeds.
</FN>
</TABLE>
F-17
<PAGE>
STRUTHERS INC. AND SUBSIDIARY
LEGRED GENETICS, INC.
BRENT LEGRED
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(UNAUDITED) (Unaudited)
For the Years Ended December 31, 1999 1998
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
NET LOSS $(903,571) $(632,014)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization and Depreciation 944,527 930,129
Loss on Investment 25,000 --
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (34,399) (23,616)
Prepaid Expenses (2,376) --
Deferred Tax Assets (479,254) (372,077)
Accounts Payable 45,518 12,156
Accrued Expenses 11,299 5,880
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (393,256) (79,542)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (20,094) --
Investments (105,000) --
Intangible Assets (281,708) --
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (406,802) --
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 924,757 7,250
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 924,757 7,250
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 124,699 (72,292)
Cash and Cash Equivalents - Beginning of Year (72,292) --
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 52,407 $ (72,292)
- --------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Independent Auditors' Report F-20
Combined Balance Sheets at November 1, 1999 and December 31, 1998 F-21
Combined Statements of Changes in Stockholder's /Owner's Equity
for the Ten Months Ended November 1, 1999 and the Year Ended
December 31, 1998 F-22
Combined Statements of Operations for the Ten Months Ended
November 1, 1999 and the Year Ended December 31,1998 F-23
Combined Statements of Cash Flows for the Ten Months Ended
December 31, 1999 and the Year Ended December 31,1998 F-24
Notes to the Combined Financial Statements F-25 to F-27
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder's of
Legred Genetics,Inc. and
The Proprietor, Brent Legred
Bricelyn, Minnesota
We have audited the accompanying combined balance sheets of Legred
Genetics, Inc. (A Minnesota Corporation) and Brent Legred (A Sole Proprietor) as
of November 1, 1999 and December 31, 1998 and the related combined statements of
changes in stockholder's/owner's equity, operations and cash flows for the ten
months ended November 1, 1999 and the year ended December 31,1998. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
Legred Genetics, Inc. and Brent Legred as of November 1, 1999 and December 31,
1998 and the combined results of their operations and their cash flows for the
ten months ended November 1, 1999 and the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
Rotenberg & Company, LLP
Rochester, New York
March 17, 2000
F-20
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS
- --------------------------------------------------------------------------------
NOVEMBER 1, December 31,
1999 1998
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ -- $ 19,497
Accounts Receivable -- 19,253
Due From Stockholder 4,334 4,363
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,334 43,113
PROPERTY AND EQUIPMENT - NET OF DEPRECIATION 202,762 258,143
- --------------------------------------------------------------------------------
TOTAL ASSETS 207,096 301,256
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S/OWNER'S EQUITY
CURRENT LIABILITIES
Accounts Payable 20,475 12,156
Note Payable 52,650 275,000
Accrued Expenses -- 11,500
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 73,125 298,656
STOCKHOLDER'S/OWNER'S EQUITY
Common Stock - No Par; 1,000 Shares Authorized;
1000 Shares Issued and Outstanding 1,000 1,000
Additional Paid-in Capital 422,901 132,201
Retained Earnings (Deficit) (289,930) (130,601)
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S/OWNER'S EQUITY 133,971 2,600
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S/OWNER'S EQUITY $ 207,096 $ 301,256
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-21
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S/OWNER'S EQUITY (DEFICIT)
- --------------------------------------------------------------------------------
For The Year December 31, 1998 And
The Ten Months Ended November 1, 1999
Total
Additional Stockholder's
Common Retained Paid-in /Owner's
Stock Earnings Capital Equity
(Deficit)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1997 $ 1,000 $ (19,248) $ -- $ (18,248)
Capital Contributions -- -- 132,201 132,201
Net Loss -- (111,353) -- (111,353)
- --------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1998 1,000 (130,601) 132,201 2,600
Capital Contributions -- -- 290,700 290,700
Net Loss -- (159,329) -- (159,329)
- --------------------------------------------------------------------------------
BALANCE - NOVEMBER 1, 1999 $ 1,000 $(289,930) $ 422,901 $ 133,971
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-22
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
COMBINED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
TEN MONTHS Year
ENDED Ended
NOVEMBER, 1 December, 31
1999 1998
- --------------------------------------------------------------------------------
SALES $ 936,001 $ 1,432,029
Other Income 9,660 15,255
- --------------------------------------------------------------------------------
TOTAL REVENUE 945,661 1,447,284
Cost of Goods Sold 728,851 1,051,973
- --------------------------------------------------------------------------------
Gross Profit 216,810 395,311
- --------------------------------------------------------------------------------
EXPENSES
Marketing And Advertising 31,367 60,328
General and Administrative 253,306 384,003
Depreciation 55,381 50,129
Interest 29,765 11,500
- --------------------------------------------------------------------------------
TOTAL EXPENSES 369,819 505,960
- --------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (153,009) (110,649)
Provision for Income Taxes 6,320 704
- --------------------------------------------------------------------------------
NET LOSS $ (159,329) $ (111,353)
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
F-23
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
TEN MONTHS Year
ENDED Ended
NOVEMBER, 1 December,31
1999 1998
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $(159,329) $(111,353)
Adjustments to Reconcile Net Loss to
Net Cash Flows From Operating Activities:
Depreciation 55,381 50,129
Changes in Assets and Liabilities:
Accounts Receivable 19,253 (19,253)
Accounts Payable 8,319 (6,092)
Accrued Expenses (11,500) 11,500
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (87,876) (75,069)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment -- (308,272)
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES -- (308,272)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital Contributions 290,700 132,201
Repayment of Debt (222,350) --
Proceeds from Notes Payable -- 275,000
Due from Stockholder 29 (4,363)
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 68,379 402,838
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (19,497) 19,497
Cash and Cash Equivalents - Beginning 19,497 --
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - ENDING $ -- $ 19,497
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-24
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - THE COMPANIES
Legred Genetics, Inc. was incorporated in the state of Minnesota in
1996 and is primarily engaged in the business of raising livestock
for sale and genetically implanting embryos into livestock for
procreation. Brent Legred is primarily engaged in raising livestock
for production and for sale in the market place. Mr. Legred is a
sole proprietor and has been in operation since 1991.
On November 2, 1999, the Companies entered into an agreement with
Struthers, Inc. and Legred Struthers Genetics, Inc., pursuant to
which the Companies sold all of their tangible and intangible
assets; including livestock, machinery and equipment, and Legred's
rights under agreements with third parties (including one with
Norsvin International AS, an international developer and
distributor of porcine genetic materials and technology). Pursuant
to the agreement Struthers is to pay Legred the sum of $1 million
in cash and $4 million worth of common shares of Struthers, which
the final number of shares will be determined by the market value
of the Company's shares from time to time. Struthers was obligated
and subsequently did build a boar stud unit and operating
laboratory, the cost of which was approximately $450,000. In
anticipation of the execution of the agreements in connection with
this acquisition, the Company formed a wholly owned subsidiary,
which was incorporated in the State of Nevada on October 21, 1999,
called Legred Struthers Genetics, Inc. All of the assets sold
pursuant to this acquisition were transferred into the subsidiary.
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is an agricultural producer principally involved in the
breeding and delivery of swine and swine genetics using advanced
reproductive techniques throughout the industry. The Company sells
primarily to producers in North America. The Company disseminates
its genetics through the sale of live animals in the form of gilts,
barrows, and boars; semen sales from boar studs; and embryo sales
using our non-surgical "Embryo Transfer System".
The Company maintains its corporate offices in Bricelyn, Minnesota
and operates its Boar stud facility in Bricelyn, Minnesota.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Legred
Genetics, Inc. and Brent Legred, a sole proprietor. The entities
have been combined due to their common ownership. All significant
inter-company balances and transactions have been eliminated in the
combination.
SEGMENT DATA, GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMER
The Company, through Legred Genetics, Inc., does business primarily
in North America. The Company also has an agreement with Norsvin,
AS (A Norwegian Company) to sell its product line. The agreement
provides for royalties of 4% to be paid to Norsvin on all sales of
its product line. The duration of the agreement is for an
indefinite period, but can be terminated by either party upon
twelve months written notice. Sales under this agreement
represented 29% and 15% of total sales for the ten months ended
November 1, 1999 and the year ended December 31, 1998,
respectively.
-continued-
The accompanying notes are an integral part of this financial statement.
F-25
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially expose the Company to
significant concentrations of credit risk consist principally of
bank deposits, temporary investments and accounts receivable. Cash
is placed primarily in high quality short-term interest bearing
financial instruments and may periodically exceed federally insured
amounts. The Company performs ongoing credit evaluations of its
customers' financial condition. An allowance for uncollectible
accounts receivable is maintained based upon the expected
collectibility of all accounts receivable.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expense during the reporting
period. Actual results can differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Breeding animals are
carried at purchase costs or inventory transfer amounts equal to
the lower of accumulated animals maintenance costs or market.
Renewals and improvements are capitalized. Costs of maintenance and
repairs that do not improve or extend asset lives are charged to
expense. Depreciation is provided on the straight-line basis over
the estimated productive useful lives of the assets as follows:
Buildings and Improvements 10 Years
Machinery and Equipment 7 Years
Breeding Herds 3 Years
Vehicles 5 Years
Office Furniture and Fixtures 5 Years
LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. The Company
evaluates any possible impairment of long-lived assets using
discounted future cash flows. When required, impairment losses on
assets to be held and used are recognized based on the fair value
of the asset. Long-lived assets to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.
- continued -
The accompanying notes are an integral part of this financial statement.
F-26
<PAGE>
LEGRED GENETICS, INC.
(A MINNESOTA CORPORATION)
AND BRENT LEGRED
(A SOLE PROPRIETOR)
BRICELYN, MINNESOTA
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- CONTINUED
INCOME TAXES
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and
liabilities and their reported amounts in the financial statements.
No income taxes for the sole proprietorship have been recorded in
the financial statements as they are the sole responsibility of the
owner.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at November 1,
1999 and December 31, 1998:
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
Buildings and Improvements $ 185,144 $ 185,144
Machinery and Equipment 156,594 156,594
Breeding Herds 87,868 87,868
Vehicles 24,426 24,426
-------------------------------------------------------------------
$ 454,032 $ 454,032
Less: Accumulated Depreciation 251,270 195,889
-------------------------------------------------------------------
Net Property and Equipment $ 202,762 $ 258,143
-------------------------------------------------------------------
Depreciation expense charged against operations for the ten months
ended November 1, 1999 and the year ended December 31, amounted to
$55,381 and $50,129, respectively.
NOTE D - NOTE PAYABLE
The companies have available two lines of credit with a maximum
borrowing base of $2,000,000. The lines bear interest at the rates
of 9.5% and 10% per annum and are secured by the general assets of
the company.
NOTE E - PROVISION FOR TAXES
The provision for income taxes is attributable to for the ten
months ended November 1, 1999 and the year ended December 31, 1998:
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
Loss Before Provision for Income Taxes $(209,009) $(110,649)
-------------------------------------------------------------------
State Income Tax $ 1,898 $ 704
-------------------------------------------------------------------
Federal Income Taxes $ 4,422 $ --
-------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
F-27
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation of Latitude Network, Inc.
3.2 Amended Articles of Incorporation of Latitude network, Inc.
3.3 Amended Articles of Incorporation of Orbis Development, Inc.
3.4 Amended Articles of Incorporation of Struthers, Inc.
3.5 By-Laws of Struthers, Inc.
4 See Exhibit 3.4 filed herewith for rights of security holders..
10.1 Agreement dated November 2, 1999 among Struthers, Inc., Legred
Genetics, Inc., Legred Genetics, and Brent Legred
(with exhibits).
10.2 Assignment and Assumption of Lease between Struthers, Inc. and
Legred Struthers Genetics, Inc.
21.1 Certificate of Incorporation of Legred Struthers Genetics, Inc.,
a subsidiary of Registrant.
21.2 Amended Articles of Incorporation of Legred Struthers Genetics,
Inc.
16
ARTICLES OF INCORPORATION
OF
LATITUDE NETWORK, INC.
Know all men by these present:
That the undersigned, have this day voluntarily associated ourselves together
for the purpose of forming a corporation under and pursuant to the provisions of
Nevada Revised Statutes 78.010. to Nevada Revised Statues 78.090 inclusive, as
amended, and certify that;
1. The name of this corporation is:
Latitude Network, Inc.
2. Offices for the transaction of any business of the Corporation, and where
meetings of the Board of Directors and of Stockholders', be held, may be
established and maintained in any part of the State of Nevada, or in any other
state, territory, or possession of the United States.
3. The nature of the business is to engage in any lawful activity.
4. The Capital Stock shall consist of 50,000,000 shares of common stock,
$0.001 par value.
5. The members of the governing board of the corporation shall be styled
directors, of which there shall be no less than 1. The Directors of this
corporation need not be stockholders. The first Board of Directors is: Bobby
Combs, whose address is 6669 Five Pennies Drive, Las Vegas, NV 89120.
6. This corporation shall have perpetual existence.
7. The name and address of each of the incorporators signing these Articles of
Incorporation are as follows: Bobby Combs, whose address is 6669 Five Pennies
Drive, Las Vegas, NV 89120.
<PAGE>
8. This Corporation shall have a president, a secretary, a treasurer, and a
resident agent, to be chosen by the Board of Directors, any person may hold
two or more offices.
9. The resident agent of this Corporation shall be Bobby Combs, whose address
is 6669 Five Pennies Drive, Las Vegas, NV 89120.
10. The Capital Stock of the corporation, after the fixed consideration thereof
has been paid or performed, shall not be subject to assessment, and the
individual liable for the debts and liabilities of the Corporation, and the
Articles of Incorporation shall never be amended as the aforesaid provisions.
11. No director or officer of the corporation shall be personally liable to the
corporation of any of its stockholders for breach of fiduciary duty as a
director of officer involving any act or omission of any such director or
officer provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director or officer for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article of the Stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts or
omissions prior to such repeal or modification.
I, the undersigned, being the incorporator herein above named for the purpose of
forming a corporation pursuant to the general corporation law of the State of
Nevada, do make and file these Articles of Incorporation, hereby declaring and
certifying that the facts within stated are true, and accordingly have hereunto
set my hand this 29th day of September, 1995.
/s/ BOBBY COMBS
---------------
Bobby Combs
State of NEVADA )
) ss
County of CLARK )
On September 29, 1995 personally appeared before me, a notary public, personally
known to me to be the person whose name is subscribed to the above instrument
who acknowledged that he/she executed the instrument.
/s/ KRISTIN D. PAYNE
--------------------
Kristin D. Payne
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Latitude Network, Inc.
(the Corporation)
We the undersigned, Bobby Combs (President/Director) and Michael L. Eaton
(Secretary/Director) of the Corporation do hereby certify:
That the board of Directors of the Corporation at a meeting duly convened and
held on the 1st day of June, 1999, adopted a resolution to amend the original
articles as follows:
Article I is hereby amended to read as follows:
First: The name of the corporation is "Orbis Development Inc."
The numbe rof shares of the Corporation outstanding and entitled to vote on as
amendment to the Articles of Incorporation are 5,000,000, that the said change
and amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
/s/ BOBBY COMBS /S/ MICHAEL L. EATON
- ---------------------- ---------------------------
Bobby Combs, President Michael L. Eaton, Secretary
State of Nevada
COUNTY SEAL
County of Clark
The undersigned Notary Public Certified, deposes and states that Bobby
Combs and Michael L. Eaton, personally accessed before xxxxx and executed the
foregoing on behalf of the Corporation as its President and Secretary
respectively on this 1st day of Junt, 1999.
STATE SEAL by:
Bridget S. Richards
Notary Public in and for
County and State
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
ORBIS DEVELOPMENT INC.
Bobby Combs certifies that:
1. The original articles were filed with the Office of the Secretary of
State on October 10, 1995.
2. As of the date of this certificate, 12,500,000 shares of stock of the
corporation have been issued.
3. Pursuant to a shareholders meeting at which is excess of 51% voted in
favor of the following amendment, the company hereby adopts the
following amendments to the amendment of the Articles of
Incorporation of this Corporation.
1. The Name of Corporation is:
Struthers, Inc.
4. The capital stock shall consist of 100,000,000 shares
of common stock $0.001 par value.
4. The Company also voted for a 2 for 1 forward split leaving 25,000,000
shares of outstanding of which 20,000,000 are free trading shares and 5,000,000
are restricted.
/s/ BOBBY COMBS
-------------------------------
Bobby Combs, President/Director
State of Nevada
------ ss
County of Clark
-----
On 6/18/98, personally appeared before me, a Notary public, Bobby Combs, who
acknowledged that she executed the above instrument.
/s/ BRIDGET S. RICHARDS
-------------------------
A Notary PUblic in and for
said County and State
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
STRUTHERS, INC.
(the "Corporation")
The undersigned, being respectively the President and Secretary of the
Corporation, do hereby certify:
1. The original articles were filed with the Office of the Secretary
of State on October 10, 1995.
2. That the Board of Directors of the Corporation at a meeting duly
held on the 9th day of November, 1999 adopted a resolution to amend the original
articles as follows:
Article 4 is hereby amended to read as follows:
"4. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Nine
Hundred Six Million Five Hundred Twenty Thousand
(906,520,000) consisting of:
(a) Nine Hundred Million (900,000,000 shares of common stock,
par value _____ (the "Common Stock"):
(b) Six-Million Five Hundred Twenty Thousand (6,520,000 shares
of preferred stock, par value $.001 ("Preferred Stock"),
One Million Five Hundred Thousand (1,500,000) of which are
designated as "Class A Convertible Preferred Stock" ("Class
A Stock"); Five Million (5,000,000) of which are designated
as "Class B Convertible Preferred Stock"("Class B Stock");
Ten Thousand (10,000) of which are designated as "Class C
Preferred Stock" ("Class C Stock") and Ten Thousand
(10,000) of which are designated as "Class D Preferred
Stock" ("Class D Stock").
(A) Common Stock. The powers, preferences and rights
of the Common Stock shall be as follows.
(i) Voting Rights. Each outstanding share
is entitled to one vote in all matters.
(ii) Dividends. Subject to the preferential
rights of the Preferred Stock (if any),
holders of Common Stock have equal
ratable rights to dividends as and when
they may be declared by the Board of
Directors, out of any funds of the
Corporation legally available for the
payment of such dividends.
(iii) Distributions on Dissolution, Etc. Upon
any liquidation, dissolution or winding
up of the Corporation, whether
voluntary or involuntary, the remaining
net assets of the Corporation shall,
after payment in full of the
liquidation preference of any Preferred
Stock, be distributed pro rata to the
holders of the Common Stock and the
Preferred Stock on an "as if converted"
basis.
<PAGE>
(B) Preferred stock. The rights, privileges and
restrictions of the Preferred stock shall be as
follows:
(i) Priority: The Preferred stock shall,
with respect to rights on liquidation,
dissolution or winding up, rank senior
to the Common stock as provided in
Subdivision (ix) of this Article 4.
(ii) Dividends and Distributions. The
holders of shares of Preferred Stock
shall not be entitled to receive any
dividends or other distributions except
on liquidation, dissolution or winding
up of the Corporation as provided in
Subdivision (ix) of this Article 4.
(iii) Voting Rights. Each share of the Class
A Stock and Class B Stock carries a
number of votes equal to the number of
shares of Common Stock then issuable
upon its conversion into Common Stock.
The Class A Stock and Class B Stock
will vote together with the Common
stock and not as separate class, except
as provided below. In no instance shall
Class A and Class B shareholders be
entitled to vote for directors of the
Corporation or on any sale, stock
issuance or the like with a combined
vote of more than 49%. In the event of
a vote of shareholders with respect to
any of the instances set forth in
subparagraphs (iv) (A) and (B) of this
Article 4, the Class C Stock shall have
a number of votes equivalent to 51% of
all shares having voting rights and
entitled to vote on such matters.
(iv) Protective Provisions.
(A) In each of the following
instances the consent of the
holders of a majority of each of
the outstanding Class A Stock,
Class B Stock and the holders of
all of the outstanding Class C
Stock and Class D Stock shall be
required for (i) any amendment or
change of the rights,
preferences, privileges or powers
of, or the restrictions provided
for the benefit of the Class A
Stock, Class B Stock, Class C
Stock and Class D Stock; (ii) any
action that authorizes, creates
or issues shares of any class of
stock having preferences superior
to or on a parity with the Class
A Stock, Class B Stock, Class C
Stock and Class D Stock; (iii)
any action that reclassifies any
outstanding shares into shares
having preferences or priority as
to dividends or assets senior to
or on a parity with a preference
of the Class A Stock, Class B
Stock, Class C stock and Class D
Stock; and (iv) any amendment of
the Corporation's Articles of
Incorporation that adversely
affects the rights of the Class A
Stock, Class B Stock, Class C
Stock and Class D Stock.
(B) In each of the following
instances the consent of the
holders of all of the outstanding
Class C Stock and Class D Stock
shall be required for (i) any
merger or consolidation of the
Corporation with one or more
other corporations and or
entities in which the
shareholders of the Corporation
immediately prior to such merger
or consolidation hold a majority
of the voting power of the
Corporation and immediately after
such merger or consolidation
would hold stock
<PAGE>
representing less than a majority
of the voting power of the
outstanding stock of the
surviving corporation; (ii) the
sale of all or substantially all
the Corporation's assets' (iii)
the liquidation, or dissolution
of the Corporation; (iv) the
declaration or payment of any
dividend on the Common Stock
(other than a dividend payable
solely in shares of Common
Stock); or (v) any action which
the holders of the Class C Stock
and Class D Stock believe to be
contrary to the best interests of
the Corporation.
(v) Reservation of Stock Issuable Upon Conversion of
Shares of Preferred Stock of the Corporation. For
the purpose of effecting the conversion of the
shares of Preferred Stock the Corporation shall
at all times reserve and keep available out of
its authorized but unissued shares of Common
Stock such number of its shares of Common Stock
as shall from time to time be sufficient to
effect the conversion of all outstanding shares
of Preferred Stock; and if at any time the number
of authorized but unissued shares of common stock
shall not be sufficient to effect the conversion
of all then outstanding shares of Preferred
stock, in addition to such other remedies as
shall be available to the holder of such
Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized
by unissued shares of Common Stock to such number
of shares as shall be sufficient for such
purposes. No fractional shares shall be issued
upon conversion of Preferred Stock, and the
number of shares of Common Stock to be issued be
rounded to the nearest whole share.
(vi) Conversion Rights.
(A) Each share of Class A Stock is
convertible at the option of the holder
into fully paid and non-assessable
shares of Common Stock as follows:
commencing on the first day of the
sixth month following the issuance of
Class A Stock ("Conversion Period") and
on the first day of each sixth month
period thereafter, for a total of six
Conversion Periods, one-sixth (1/6) of
the shares of Class A Stock held may be
converted by each holder thereof. The
amount of common shares into which the
class A Stock shall be converted at
each Conversion Period shall be as
follows: at each of the six Conversion
Periods the amount of Class A Stock
shares which may be converted shall be
divided by the average market value
between the bid and asked price of the
Corporation's shares during the ten day
trading period immediately preceding
the date of such Conversion period, but
not more than $.40, and the resultant
figure multiplied by three.
(B) Each share of Class B stock is
convertible at the option of the holder
into fully paid and non-assessable
shares of Common Stock as follows:
commencing on the first day of the
sixth month following the issuance of
Class B Stock ("Conversion Period") and
on the first day of each sixth month
period thereafter, for a total of six
Conversion Periods, one-sixth (1/6) of
the shares of Class B Stock held may be
converted by each holder thereof. The
amount of common shares
<PAGE>
into which the Class B Stock shall be
converted at each Conversion Period
shall be as follows: at each of the
six Conversion Periods the amount of
Class B Stock shares which may be
converted shall be divided by the
average market value between the bid
and asked price of the Corporation's
shares during the ten day trading
period immediately preceding the date
of such Conversion Period, but not
more than $.40, and the resultant
figure multiplied by three.
(vii) Purchase Rights. The shares of Class D stock, as
a unit, shall have the right, at the option of
the holders thereof, their designees, assignees,
heirs and/or legal representatives, to purchase
on the first day of January and on the first day
of July of each year shares of Common Stock
equivalent in number to 5% of the issued and
outstanding stock of the Corporation. For this
purpose, the number of issued and outstanding
shares shall be fixed at a maximum of 100 million
shares or the then outstanding stock, whichever
is less, and a minimum of 50 million shares or
the then outstanding shares, whichever is
greater.
The purchase price shall be equal to 25% of the
average of the bid and asked price of the
Corporation's shares during the ten day trading
period immediately preceding the date of the
exercise of such right to purchase.
The right to purchase shall be cumulative if not
exercised in any semi- annual period and shall
not be subject to forfeiture in the event it is
not exercised in any semi-annual period. This
right to accumulate shall not exceed a maximum of
four consecutive bi-annual periods.
(viii) Conversion Adjustments. In the event this
Corporation effects a forward split or subdivides
the outstanding shares of Common Stock, or issues
additional shares of Common Stock as a dividend
on shares of Common stock, the Conversion Rate
shall be proportionately increased. In the event
the Corporation effects a reverse split or
combines the outstanding shares of Common Stock,
the Conversion Rate shall be proportionately
decreased.
(ix) Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the
Corporation a merger or consolidation of the
Corporation in which its shareholders do not
retain a majority of the voting power in the
surviving corporation, or a sale of all or
substantially all of the corporation's assets,
the holders of the Class A Stock will be entitled
to receive an amount equal to the original
purchase price per share for the Class A stock
plus an amount equal to all declared but unpaid
dividends thereon (the "Preference Amount").
After the full liquidation preference on all
outstanding shares of the class A Stock has been
paid, then thereafter the holders of the Class B
Stock, will be entitled to receive an amount
equal to the original purchase price per share
for the class B Stock plus an amount equal to all
declared but unpaid dividends thereon. After the
full liquidation preference on all outstanding
shares of the Class B Stock has been paid, any
remaining funds and assets of the Corporation
legally available for distribution to
shareholders will be distributed pro rata among
the holders of the Preferred Stock and the common
Stock on an "as-if-converted" basis.
<PAGE>
If the Corporation has insufficient assets to
permit payment of the Preference Amount in full
to any class of Preferred Stock shareholders,
then the assets of the Corporation will be
distributed ratably to the holders of that class
of Preferred Stock in proportion to the
Preference Amount each such holder would
otherwise be entitled to receive.
(x) No Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or
through any reorganization, recapitalization,
transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms
to be observed or performed hereunder by the
Corporation, but will at all times in good faith
assist in the carrying out of all the provisions
herein and in the taking of all such actions as
may be necessary or appropriate in order to
protect the Conversion Rights and Voting Rights
of the holders of the Preferred Stock against
impairment."
3. A new article to be known as Article "5" shall be added and
shall read as follows:
"5. No Preemptive Rights. Except as provided in subparagraph
(b) (B) (vii) of Article 4, no holders of either Common
Stock or Preferred Stock of the Corporation shall be
entitled, as of right, to purchase or subscribe for any
part of any unissued stock of the Corporation or of any
stock of the Corporation to be issued by reason of any
increase of the authorized capital stock of the Corporation
or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible
into or carrying options or warrants to purchase stock or
other securities of the Corporation or to purchase or
subscribe for any stock of the Corporation purchased by the
Corporation or its nominee or nominees, or to have any
other preemptive rights."
4. A new article to be known as Article "6" shall be added and
shall read as follows:
"6. Combinations with Interested Stockholders. Sections NRS
78.411 to 78.444 inclusive of the Nevada Revised Statutes
shall be applicable to this Corporation whether or not the
Corporation has a class of voting shares registered with
the Securities and Exchange Commission under section 12 of
the Securities Exchange Act."
5. The number of shares of the Corporation outstanding and
entitled to vote on an amendment to the Articles of
Incorporation are 346,677,550 that the said changes and
amendments have been consented to and approved by a
majority vote of the stockholders holding at least a
majority of the stock outstanding and entitled to vote
thereon.
/S/ DOUGLAS W. BEATTY /S/ RHETT C. SEABROOK
- --------------------- ---------------------
Douglas W. Beatty, President Rhett C. Seabrook, Secretary
<PAGE>
STATE OF SOUTH CAROLINA
COUNTY OF CHARLESTON
On the 25TH day of February, 2000 before me personally appeared
Douglas W. Beatty and Rhett C. Seabrook, each of whom acknowledged to me that he
executed the above instrument.
/S/ JOANN COFULD
Notary Public
BYLAWS OF
STRUTHERS, INC.
ARTICLE I -- OFFICES
The principal office of the corporation shall be located in the State of South
Carolina in the County of Charleston. The corporation may have such other
offices, either within or outside the state, as the Board of Directors may
designate or as the business of the corporation may require from time to time.
The registered office of the corporation may be, but need not be, identical with
the principal office, and the address of the registered office may be changed
from time to time by the Board of Directors.
ARTICLE II -- SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be held
at 4:00 o'clock PM on the Third Tuesday in the month of January in each year,
beginning with the year 2000. If the day fixed for the annual meeting shall be a
legal holiday, such meeting shall be held on the next succeeding business day.
Section 2. Special Meetings. Special meetings of the shareholders, for any
purpose, unless otherwise prescribed by statute, may be called by the president
or by the Board of Directors, and shall be called by the president at the
request of the holders of not less than one-tenth of all the outstanding shares
of the corporation entitled to vote at the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any place as
the place of any annual meeting or for any special meeting called by the Board
of Directors. A waiver of notice signed by all shareholders entitled to vote at
a meeting may designate any place as the place for such meeting. If no
designation is made, or if a special meeting shall be called otherwise than by
the Board, the place of meeting shall be the registered office of the
corporation.
Section 4. Notice of Meeting. Written or printed notice stating the place, day
and hour of the meeting, and, in case of a special meeting, the purposes for
which the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting, either personally or by mail, by or
at the persons calling the meeting, to each shareholder of record entitled to
vote at such meeting, except that if the authorized capital stock is to be
increased at least thirty days notice shall be given. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid. If requested by the
person or persons lawfully calling such meeting, the secretary shall give notice
thereof at corporate expense.
1
<PAGE>
Section 5. Closing of Transfer Books or Fixing of Record Date. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for any stated period not exceeding fifty days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty days, and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof except where the determination has been
made through the closing of the stock transfer books and the stated period of
the closing has expired.
Section 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
For a period of ten days prior to such meeting, this list shall be kept on file
at the principal office of the corporation and shall be subject to inspection by
any shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
Section 7. Quorum. Fifty One Percent (51%) of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a quorum of the
outstanding shares are represented at a meeting, a majority of the shares so
represented my adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be
2
<PAGE>
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
If a quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by law or the articles of incorporation.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or his or her duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution. unless otherwise provided in the
proxy.
Section 9. Voting of Shares. Each outstanding share, regardless of class, shall
be entitled to one vote, and each fractional share shall be entitled to a
corresponding fractional vote on each matter submitted to a vote at a meeting of
shareholders. Cumulative voting shall not be allowed.
Section 10. Voting of Shares by Certain Holders. Neither treasury shares, not
shares of its own stock held by the corporation in a fiduciary capacity, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of Directors of such other corporation is held by this
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe or, in
the absence of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him or her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares standing in the name of a trustee may be
voted by him or her, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him or her without a transfer of such shares
into his or her name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his or her name if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the names of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
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<PAGE>
Section 11. Informal Action by Shareholders. Unless otherwise provided in the
articles of incorporation, any action required or permitted to be taken at a
meeting of the stockholders may be taken without a meeting if, before or after
the action, a written consent thereto is signed by stockholders holding at least
a majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting, then that proportion of
written consents is required. In no instance where action is authorized by
written consent need a meeting of stockholders be called or notice given.
ARTICLE III -- BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall be
managed by its Board of Directors, except as otherwise provided by statute or
the articles of incorporation.
Section 2. Number, Tenure and Qualifications. The number of Directors of the
corporation shall be not less than three nor more than five, unless a lesser
number is allowed by statute. Directors shall be elected at each annual meeting
of shareholders. Each director shall hold office until the next annual meeting
of shareholders and thereafter until his or her successor shall have been
elected and qualified.
Directors need not be residents of Nevada or shareholders of the
corporation. Directors shall be removable in the manner provided by statute.
Section 3. Vacancies. Any director may resign at any time by giving written
notice to the president or to the secretary of the corporation. Any vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though not less than a quorum. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office. Any Directorship to be filled by the affirmative vote of
a majority of the Directors then in office or by an election at an annual
meeting or at a special meeting of shareholders called for that purpose, and a
director so chosen shall hold office for the term specified in Section 2 above.
Section 4. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this bylaw immediately after and at the same
place as the annual meeting of shareholders. The Board of Directors may provide
by resolution the time and place for the holding of additional regular meetings
without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the president or any two Directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place as the place for holding any special meeting of the Board of Directors
called by them.
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Section 6. Notice. Notice of any special meeting shall be given at least seven
days previous thereto by written notice delivered personally or mailed to each
director at his or her business address, or by notice given at least two days
previously by telegraph. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail so addressed, with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. any director
may waive notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice of waiver of notice of such
meeting.
Section 7. Quorum. A majority of the number of Directors fixed by Section 2
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice.
Section 8. Manner of Acting. The act of the majority of the Directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 9. Compensation. By resolution of the Board of Directors, any director
may be paid any one or more of the following: expenses, if any, of attendance at
meetings; a fixed sum for attendance at each meeting; or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 10. Informal Action by Directors. Unless otherwise restricted by the
articles of incorporation, any action required or permitted to be taken at a
meeting of the board of directors may be taken without a meeting if, before or
after the action, a written consent thereto is signed by all the members of the
board, or the members of the board may participate by means of a telephone
conference by which all persons participating can hear each other.
ARTICLE IV -- OFFICERS AND AGENTS
Section 1. General. The officers of the corporation shall be a president, one or
more vice presidents, a secretary and a treasurer. The salaries of all the
officers of the corporation shall be fixed by the Board of Directors.
One person may hold any two offices, except that no person may
simultaneously hold the offices of president and secretary.
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Section 2. Election and Term of Office. The officers of the corporation shall be
elected by the Board of Directors annually at the first meeting of the Board
held after each annual meeting of the shareholders.
Section 3. Removal. any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby.
Section 4. Vacancies. A vacancy in any office, however occurring, may be filled
by the Board of Directors for the unexpired portion of the term.
Section 5. President. The president shall:
(a) subject to the direction and supervision of the Board of Directors,
be the chief executive officer of the corporation;
(b) shall have general and active control of its affairs and business
and general supervision of its officers, agents and employees; and
(c) the president shall have custody of the treasurer's bond, if any.
Section 6. Vice Presidents. The vice presidents shall:
(a) assist the president; and
(b) shall perform such duties as may be assigned to them by the
president or by the Board of Directors.
Section 7. Secretary. The secretary shall:
(a) keep the minutes of the proceedings of the shareholders and the
Board of Directors;
(b) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law;
(c) be custodian of the corporate records and of the seal of the
corporation and affix the seal to all documents when authorized by the Board of
Directors.
(d) keep at its registered office or principal place of business a
record containing the names and addresses of all shareholders and the number and
class of shares held by each, unless such a record shall be kept at the office
of the corporation's transfer agent or registrar;
(e) sign with the president, or a vice president, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(f) have general charge of the stock transfer books of the corporation,
unless the corporation has a transfer agent; and
(g) in general, perform all duties incident to the office as secretary
and such other duties as from time to time may be assigned to him or her by the
president or by the Board of Directors.
Section 8. Treasurer. The treasurer shall:
(a) be the principal financial officer of the corporation;
(b) perform all other duties incident to the office of the treasurer
and, upon request of the Board, shall make such reports to it as may be required
at any time;
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<PAGE>
(c) be the principal accounting officer of the corporation; and
(d) have such other powers and perform such other duties as may be from
time to time prescribed by the Board of Directors or the president;
ARTICLE V -- STOCK
Section 1. Certificates. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the corporation by its
president or a vice president and the secretary, and shall be sealed with the
seal of the corporation, or with facsimiles thereof. No certificate shall be
issued until the shares represented thereby are fully paid.
Section 2. Consideration for Shares. Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof, if
any) as shall be fixed from time to time by the Board of Directors. Such
consideration may consist, in whole or in part of money, other property,
tangible or intangible, or in labor or services actually performed for the
corporation, but neither promissory notes nor future services shall constitute
payment or part payment for shares.
Section 3. Transfer of Shares. Upon surrender to the corporation or to a
transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and such documentary stamps as may be required by law, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of stock shall be
entered on the stock book of the corporation which shall be kept at its
principal office, or by its registrar duly appointed.
Section 4. Transfer Agents, Registrars and Paying Agents. the Board may at its
discretion appoint one or more transfer agents, registrars and agents for making
payment upon any class of stock, bond, debenture or other security of the
corporation.
ARTICLE VI -- INDEMNIFICATION OF OFFICERS AND DIRECTORS
Each director and officer of this corporation shall be indemnified by the
corporation against all costs and expenses actually and necessarily incurred by
him or her in connection with the defense of any action, suit or proceeding in
which he or she may be involved or to which he or she may be made a party by
reason of his or her being or having been such director or officer, except in
relation to matters as to which he or she shall be finally adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty.
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ARTICLE VII -- MISCELLANEOUS
Section 1. Waivers of Notice. Whenever notice is required by law, by the
articles of incorporation or by these bylaws, a waiver thereof in writing signed
by the director, shareholder or other person entitled to said notice, whether
before or after the time stated therein, or his or her appearance at such
meeting in person or (in the case of a shareholders' meeting) by proxy, shall be
equivalent to such notice.
Section 2. Seal. The corporate seal of the corporation shall be in the form
impressed on the margin hereof.
Section 3. Fiscal Year. The fiscal year of the corporation shall be as
established by the Board of Directors.
Section 4. Amendments. The Board of Directors shall have power to make, amend
and repeal the bylaws of the corporation at any regular meeting of the Board or
at any special meeting called for the purpose.
AGREEMENT made as of this 2 day of November 1999, among Struthers, Inc., a
publicly held Nevada Corporation, with offices at 1 Carriage Lane, Building D,
Suite G-E, Charleston, South Carolina 29407 ("Struthers"), Legred Genetics,
Inc., a privately held Minnesota Corporation with offices at 3500 490th Avenue,
Bricelyn, Minnesota 56014 and Legred Genetics, a sole proprietorship owned by
Brent Legred ("Legred"); and Brent Legred, residing at 3500 490th Avenue,
Bricelyn, Minnesota 56014.
WHEREAS, Struthers is primarily involved in the marketing of hog genetics and
through the use of embryo transplants to create genetically superior (disease
free) herds; and
WHEREAS, Legred is in the business of developing, producing, marketing, selling
and distributing breeding pigs and their semen; and
WHEREAS, Brent Legred is the President and controlling shareholder of Legred;
and
WHEREAS, the parties wish to set forth the terms pursuant to which there will be
an ongoing relationship between and among themselves.
NOW, THEREFORE, it is agreed as follows:
1. Struthers shall form a wholly owned subsidiary to be incorporated in
the State of Nevada to be known as Legred Struthers Genetics, Inc.
("LSG").
2. Legred shall lease to Struthers approximately 40 acres of land ("the
Property") it presently owns in Seely township Section 19 Faribault
County, Minnesota for One ($1) Dollar per year for a term of 99
years. The Lease shall be in substantially the form annexed hereto as
Exhibit "A".
(a) The residence of Brent Legred, the president of Legred, is
located adjacent to the property and shall continue to be
occupied exclusively by Mr. Legred and/or his designees as
a residence, the boundaries of which shall be indicated on
the survey of the property and annexed hereto as Exhibit
"B".
(b) Struthers is hereby granted a right of first refusal to
purchase Mr. Legred's residence and land as per Exhibit
"B". In the event Mr. Legred receives a bona fide written
offer therefor, he must immediately notify Struthers
thereof and forward a copy of such offer via overnight mail
courier to Struthers. Struthers shall then have ten (10)
business days after receipt of such written offer to give
written notice to Mr. Legred of the exercise of its option
to purchase the said residence and land for the same price
and upon the same terms as provided for in the said written
offer or its rejection thereof. Unless so exercised by
Struthers, the option shall terminate. However, if
thereafter the sale to the offeror does not take place, or
is terminated, or Mr. Legred agrees to seel the residence
and land at a lesser price or upon better terms to the same
person or entity which made the offer, Struthers' right of
first refusal shall remain in effect in like manner for the
revised offer from the offeror and/or any subsequent bona
fide offer, as the case may be.
<PAGE>
(c) Struthers shall, at its cost, construct a Boar Stud
Facility on the Property capable of housing no less than
400 Boar Studs. It is anticipated that the cost of this
facility will be approximately $400,000. Within the said
facility Struthers shall, at its cost, install all the
equipment necessary to process and package Boar semen. The
cost of this equipment, installed, is estimated at
approximately $100,000.
3. Upon the payment to Legred of $1 million as provided in paragraph "8"
hereof, Legred shall transfer and assign to LSG all of Legred's
assets (exclusive of agreements with third parties which are being
transferred and assigned simultaneously herewith and for which
provision is made in paragraph "6" hereof), which consists among
other things of its personnel and physical assets ("as described in
Exhibit "C") comprising its production unit; its personnel manning
its present sales and marketing unit; Legred's customer base, the
list of which is set forth on Exhibit "D"; its cash on hand and
receivables; Legred's name, good will and reputation which includes
that of Brent Legred, its president all of its right title and
interest in and to its approximately 300 sows or breeding animals and
100 boars together with all offspring thereof, which includes the
fifty plus (50+) Stud Boars referenced in paragraph "5" hereof and
all other offspring which will consist of approximately 3,000 in
total ("the Animals") along with all interests, sales and contractual
rights with all gifts multipliers.
4. Legred covenants and warrants that it owns all of the Property listed
in Schedule "C", the assets and the Animals free and clear of any
liens or encumbrances with the exception of loans with the State Bank
of Easton which will be satisfied at the time of transfer.
5. Legred will immediately stock the Boar stud facility with and
transfer all right, title and interest to the approximately fifty
plus (50+) Stud Boars to LSG. The genetic breeding of those stud
Boars will commence upon the completion of the facility to house the
Stud Boars (or sooner if reasonably practical) to increase the number
of Stud Boars to 400 in number. The sale of their semen will commence
immediately. The profit from the sale of their semen and the profit
from the sale of such Boars and/or their offspring shall belong to
LSG. In lieu of compensation for the fifty plus (50+) Stud Boars,
Legred will hold a security interest first lien against the Stud Boar
facility including all Stud Boars and equipment located therein to be
evidenced by a UCC-1 filing until the full payment of $1 Million
Dollars has been received by Legred pursuant to paragraph "8" hereof.
Legred covenants and warrants that this lien will be discharged
immediately upon completion of the $1 Million Dollar payment. If the
$1 Million Dollar payment is not made as herein provided, Legred may
foreclose under the lien for the amount not paid.
6. Legred shall assign to LSG all its right, title and interest in and
to all of its agreements with third parties including that with
Norsvin International, a copy of which is annexed hereto and made a
part hereof and all of which contracts are listed by name and date on
Exhibit "F" with copies of same annexed thereto and made a part
hereof.
7. Omitted.
<PAGE>
8. Legred , or its designee, shall receive in exchange for Legred's
assets as herein described the sum of $1 Million Dollars in cash
payable as follows:
(a) $100,000 upon execution hereof,
(b) the balance in three (3) equal payments of $300,000 each, the
first being due six (6) months from the execution hereof, the next two (2)
payments at two (2) six (6) month intervals thereafter.
(c) if Struthers successfully completes a stock offering to the
public, within eighteen (18) months from the date hereof, Legred will receive
the balance of monies owed toward the remaining $900,000, as described in
subparagraph "b" of this paragraph "8" within ten (10) business days of close of
the stock offering. However, the aforesaid payment shall not exceed fifty (50)
percent of net capital raised through such stock offering and the balance, if
any shall be paid in two (2) equal payments six (6) month intervals.
9. In addition to the cash payment for which provisions is made in
paragraph "8" hereof, upon execution of this contract and all of the
other agreements and Exhibits referenced herein, Legred and/or its
designee shall receive:
(a) an amount of Struthers' shares equivalent to $1 Million Dollars
of Struthers' stock based upon the average market value (between the bid and ask
price) during the thirty (30) day period preceding the execution date of this
agreement. It is agreed that as so calculated as of the date hereof the average
market value is $.1126 and the amount of Struthers' shares equivalent to $1
Million is 8,880,000 payable as follows:
(i) Upon the execution hereof 2,220,000 shares of which 1
million shall be unrestricted and free trading and
1,220,000 restricted; and
(ii) On January 1, 2000 6,660,000 restricted shares--
If at the time the above mentioned restricted shares become
free trading, they are being traded for less than $.1126
per share, Struthers shall give to Legred additional shares
of common stock of Struthers, the value of which when they
become free trading shall, when added to the value of the
restricted shares which became free trading be such that
the total value of all such shares when based upon the
market price that day equals the sum of $887,400; and
(b) $3,000,000 in value of Struthers Shares of common stock in the
following manner:
(1) $1,000,000 in value of shares on the six (6) month
anniversary of the execution of this contract, the
valuation of which shall be the average market value
between the bid and ask price of Struthers shares during
the immediate thirty (30) day period preceding such date.
If at that time these shares become unrestricted and free
trading:
<PAGE>
(i) the market value of these shares is less than $1,000,000
Struthers shall give to Legred additional shares of
Struthers common stock, the value of which when they become
free trading when added to the value of these shares equals
a total value of $1,000,000 based upon the market price of
the shares of Struthers common stock on said date; or
(ii) If the value of these shares exceeds $1,000,000 in value,
the number of shares equivalent to such increase in value,
based upon the market price shall be applied in reduction
of the value of the next transfer of stock of Struthers to
Legred as provided for herein if such transfers have not
already occurred.
(2) $1,000,000 in value of shares on the one (1) year
anniversary of the execution of this contract, the
valuation of which shall be the average market value
between the bid and ask price of Struthers shares during
the immediate thirty (30) day period preceding such date.
If at that time these shares become unrestricted and free
trading:
(i) the market value of these shares is less than
$1,000,000 Struthers shall give to Legred
additional shares of Struthers common stock, the
value of which when they become free trading when
added to the value of these shares equals a total
value of $1,000,000 based upon the market price
of the shares of Struthers common stock on said
date; or
(ii) If the value of these shares exceeds $1,000,000
in value, the number of shares equivalent to such
increase in value, based upon the market price
shall be applied in reduction of the value of the
next transfer of stock of Struthers to Legred as
provided for herein if such transfers have not
already occurred.
(3) $1,000,000 in value of shares on the eighteenth (18) month
anniversary of the execution of this contract, the
valuation of which shall be the average market value
between the bid and ask price of Struthers shares during
the immediate thirty (30) day period preceding such date.
If at that time these shares become unrestricted and free
trading:
(i) the market value of these shares is less than
$1,000,000 Struthers shall give to Legred additional shares
of Struthers common stock, the value of which when they
become free trading when added to the value of these shares
equals a total value of $1,000,000 based upon the market
price of the shares of Struthers common stock on said date;
or
(ii) If the value of these shares exceeds $1,000,000 in
value, the number of shares equivalent to such increase in
value, based upon the market price shall be cancelled on
the stock records of Struthers.
The amount of the dollar value for which the final payment shall be reduced by
the percentage by
<PAGE>
which the net income from the semen sales per 100 Boars for the previous
eighteen (18) month period is less than $600,000. The final adjustment of this
number shall be made at the end of the eighteen (18) month period from the date
hereof.
Struthers shall secure its obligation under this paragraph "9" by providing
Legred a first security interest in all assets, breeding stock (sows and boars)
which shall include all breeding stock transferred by Legred to Struthers
pursuant to this agreement and all offspring for breeding purposes whether owned
by Struthers or LSG, to be evidenced y a UCC-1 filing.
The foregoing provisions of this paragraph "9" notwithstanding, at Struthers'
sole discretion it may substitute cash, in whole or in part, in lieu of stock.
10. Struthers agrees to maintain current status in all required SEC filings. The
allocation of the sale price to assets of Legred and Brent Legred to be
transferred pursuant to this agreement is shown on Exhibit "G" attached hereto.
11. To the extent that the net income from the sale of the semen from
Boars, gilts and other animals is not sufficient to meet all of LSG's
ongoing operational costs, Struthers, Inc. shall guarantee the
payment thereof and shall pay same for LSG.
12. This agreement represents the entire agreement between the parties
hereto, and there are no agreements, understandings or undertakings
except as set forth herein. All prior negotiations and writings
between the parties and their representatives are superseded hereby.
This agreement may not be amended, modified or supplemented except by
a writing, duly and properly executed, and no term, condition or
covenant hereof may be waived other than by such writing.
13. Whenever any notice ("Notice") shall or may be given by one party to
the other, such Notice shall be in writing and addressed to the
parties at their respective addresses as set forth in this Agreement
and served by (i) a nationally recognized overnight express courier,
or (ii) registered or certified postage paid mail return receipt
requested. The date the Notice is received shall be the date of
service of Notice. In the event an addressee refuses to accept
delivery, however, then Notice shall be deemed to have been served on
either (i) the next business day after the Notice was sent in the
case of attempted delivery by overnight courier, or (ii) five (5)
business days after mailing the notice in the case of registered or
certified mail. Either party may, at any time, change its Notice
address by giving the other party Notice thereof, in accordance with
this paragraph "13".
IN WITNESS THEREOF, the undersigned have executed this Agreement as
of the date first heretofore written.
STRUTHERS, INC.
BY: /s/ DOUGLAS W. BEATTY
---------------------
<PAGE>
Name: Douglas W. Beatty
Title: President
LEGRED GENETICS, INC.
By /S/ BRENT LEGRED
-------------------
Name: Brent Legred
Title: President
LEGRED GENETICS, INC.
By /S/ BRENT LEGRED
-------------------
Name: Brent Legred
Title: Sole Proprietor
/S/ BRENT LEGRED
----------------
BRENT LEGRED
<PAGE>
EXHIBIT "A"
Lease
<PAGE>
LEASE AGREEMENT
In consideration of the mutual covenants hereinafter set forth, and
intending to be legally bound, Brent Legred and Julie Legred residing at 3500
490th Ave., Bricelyn, MN 56014, as Lessors, and Struthers, Inc., a publicly held
Nevada corporation with offices at One Carriage Lane, Building D, Suite G-E,
Charleston, South Carolina 29407, as Tenant do hereby agree as follows:
1. PREMISES
1.1 Demise. Lessors does demise, lease and rent to Tenant and Tenant
does hire, rent and take from Lessors the following Leased Premises described on
Exhibit A attached:
1.2(a) Tenant's Work. Tenant agrees that the improvements which it
makes to the premises shall be at its sole cost and be done in a good and
workmanlike manner.
Lessors has made no representations or warranties either expressed or implied
regarding the quality or condition of the Leased Premises.
1.3 Use of Premises. Tenant shall use and occupy the Leased Premises
for the purpose of construction and operation of a swine raising facility. No
other use is authorized without the prior written consent of Lessors. Prior to
November lst of each year Tenant will notify Lessors of what portion of the
leased premises will be used by Tenant for such purposes for the next succeeding
12 month period. Lessors reserve the right to use that portion of the leased
premises each year which has not been identified by Tenant as to be used by
Tenant for the purpose of raising crops. Such reservation shall include the
right to fertilize, till, plant and harvest growing crops therefrom and to
control weeds and pests thereof. Each year Lessors shall comply with Paragraph
42(g) for that portion of the premises farmed by the Lessors or their assigns.
1.3(a) No Unlawful Uses. Tenant will not use, occupy or permit the
Leased Premises or any part thereof to be used or occupied for any unlawful or
illegal business, use or purpose, nor for any business, use or purpose deemed by
Lessors to be disreputable or extra-hazardous nor for any purpose or in any way
in violation of any present or future laws, rules, requirements, orders,
directions, ordinances or regulations of the United States of America, or of the
state, county or city government, or other municipal, governmental or lawful
authority whatsoever, and shell indemnify and hold Lessors harmless from the
consequences of any such violation. If Tenant receives any written notice of any
such violation, applicable to the Leased Premises, it shall give prompt notice
thereof to Lessors.
1.3(b) Obligation of Tenant to Conform,. to Lawful Uses. Tenant shall,
at its expense, conform to all laws, orders, ordinances and regulations of
federal, state, county and municipal authorities and with any directives made
pursuant to law by any public officer or officers which shall, with respect to
the occupancy, use or manner of use of the Leased Premises or to any abatement
of nuisance, impose any order or duty upon Lessors or Tenant arising from
Tenant's occupancy, use or manner of use of the Leased Premises.
<PAGE>
2. TERM
2.1 TERM OF LEASE. The term of this Lease shall be for ninety-nine (99)
year(s) commencing on the 2 day of NOV. 1999, or the date on which Tenant
assumes possession of the Leased Premises, which-ever occurs first, and
continues to midnight of the 2 day of NOVEMBER, 2099 , unless earlier terminated
by law or as provided herein.
2.2 HOLDING OVER. If Tenant remains in possession of the Leased
Premises after the expiration of the term hereon and without the execution of a
new written lease, or a written extension agreement, Tenant shall be deemed to
be occupying the Leased Premises as a tenant from month-to-month, terminable on
thirty (30) days' notice given by either party to the other, at a monthly rental
equal to one (1%) percent of the value of the premises and otherwise subject to
all the conditions and obligations of this Lease insofar as they are applicable
to a month-to-month tenancy.
3. RENT/DEPOSITS
3.1 BASE RENT. The Tenant shall pay as "Base Rent" for the Leased
Premises One ($1.00) Dollar per year payable on the 1st day of each year during
the term of this lease.
4. STATEMENT OF OBLIGATION
4.1 LESSORS OBLIGATIONS. Lessors shall have no obligation under this
contract other than to allow tenant to use the Leased Premises and to allow
Tenant to protect its right to continued possession thereof in the event Lessors
are ever in default on any obligations secured by Leased Premises by making all
required payments on such obligations in default if the default threatens
Tenant's continued right of possession of such premises.
4.2 tenant's obligations. Tenant shall have the following obligations
under the terms of this lease:
4.2(a) To make all rent payments and all other payments provided for in
Paragraph 3 hereof.
4.2(b) Allow no liens to be impressed upon the premises for any purpose for over
30 days (See Paragraph 7.4)
4.2(c) To pay all costs and expenses relating to the Leased Premises including
but not limited to:
(i) All Real Estate taxes,
(ii) All utilities used on the premises.
(iii) All construction costs for improvements made to the premises by the
Tenant. These costs shall include professional services rendered for
all materials and labor and all other costs associated with any
construction project
(iv) All repairs and upkeep of the premises (v) All insurance costs required
by the lease agreement.
(vi) All legal costs incurred by Lessors and Tenant involving disputes
relating to Leased Premises for the payment of rent or other payments
required thereby.
(vii) All fees and license charges relating to the Tenant's use of the
<PAGE>
premises.
(viii) All taxes imposed by any legal of governmental authority arising from
the ownership of or use of the Leased Premises except for income-tax
associated with the sale of Leased Premises.
4.2(d) -- To provide liability insurance for all operations of Tenant on Leased
Premises with insurance limits of a minimum of $3,000,000.00 which insurance
policies shall name Lessors as additional parties insured.
4.2(e) To indemnify and hold Lessors harmless from any and all claims made
against Lessors arising out of Tenants use of Leased Premises including claims
made by governmental agencies or any other person or entity.
4.2(f) To not permit any pollutant or any other material which would cause
environmental damage to accumulate on the premises or to emit from the Leased
Premises.
4.2.(g) To destroy all Russian thistles and other noxious weeds growing on said
land, declared by statute to be common nuisances, within the time prescribed by
law and shall keep all roadways and other parts of the land moved and free of
growing weeds. It shall not permit the land to be used for any purposes
prohibited under Paragraph l.4(e) and shall not allow any use which would
constitute a nuisance of any kind unless such use was permitted under this
lease.
4.2(h) To perform all of its obligations to "Legred" pursuant to that certain
agreement dated the 2ND day of NOVEMBER, 1999, between "Legred" and "Struthers"
which provided for the sale of property and for this lease.
5. LOSS OR DAMAGE
5.1 Tenant's Property. All property and improvements of Tenant in or
about the Leased Premises shall be kept, stored and/or maintained by Tenant
without any liability of Lessors for loss or damage thereto, including but not
limited to loss from fire, explosion, wind, rain, hail, water leakage, bursting
of pipes or conduits, sprinklers, gas, electricity, or structural failure,
regardless of negligence, nor shall Lessors be liable to Tenant for any
interruption or business conducted by Tenant, regardless of cause.
6. ALTERATIONS
7.1 Quality of Work. Tenant agrees that all work done in making
improvements or alterations to the premises shall be done in a good and
workmanship like manner, in conformance with all state, township and other
government codes and zoning ordinances.
1. INDEMNIFICATION AND SUBROGATION
7.1 Tenant to Indemnify. Tenant shall hold Lessors harmless from and
shall indemnify Lessors from any and all liability, damage, loss and expense
arising or resulting from the acts or omissions of or caused by Tenant or
Tenant's employees, servants, agents, guests, assigns, subtenants, visitors or
licensees in, upon or about the demised premises, any Building or adjacent
areas, or arising out of or related to the use and occupancy of the demised
premises or the business or activity conducted with respect thereto including
injuries to person and property.
<PAGE>
7.2 Limit of Lessors' Liability. In the event Tenant shall have any
claim of any nature whatsoever in respect to this Lease or Tenant's use of the
Leased Premises. Tenant shall have no right or cause of action against Lessors
personally.
7.3 Notwithstanding any other provision in this Lease to the contrary,
Tenant hereby releases Lessors from any and all liability or responsibility to
the Tenant or anyone claiming through or under it by way of subrogation or
otherwise for any loss or damage to person or property.
7.4 Liens. Tenant will not commit or suffer any act or neglect whereby
the Leased Premises or any improvement placed thereon by Tenant will, at any
time during the term of this Lease, become subject to any attachment, judgment,
lien, charge or encumbrance whatsoever, and will indemnify and hold Lessor
harmless from all loss, cost and expense with respect to such encumbrance. If
Tenant shall fail to discharge any such lien within thirty (30) days after
notice from Lessors, Lessors may, at its option, discharge the same and treat
the cost thereof, plus interest thereon at the rate of eight percent (8%) per
annum. as additional rent payable with the monthly installment of base rent next
becoming due, it being expressly agreed that such discharge by Lessors shall not
be deemed to waive or release the default of Tenant in not discharging the same.
Lessors shall have the right to post signage on the premises, and to give
written notice to all suppliers and workmen providing goods or services to the
premises that neither Lessors nor the premises may be looked to for payment of
such material or labor. Tenant shall furnish Lessors with the names and
addresses of all materialmen, contractors and laborers who provide material or
labor for any improvements made to the Leased Premises. (see Paragraph 4.2(b))
8. INSURANCE
8.1 Tenant Insurance. Tenant shall carry contents insurance in an
amount equal to the full insurable value thereof and will provide Lessors with
proof of such insurance and shall keep any leasehold improvements installed by
Tenant at its expense, insured during the term of this Lease, against loss or
damage by fire and by any of the casualties covered by standard extended
coverage in an amount at least equal to the insurable value of the improvement,
minus deductibles. Tenant agencies that all insurance proceeds shall be
reinvested in improvements to the Leased Premises.
9. LESSOR'S RIGHT OF ENTRY
9.1 For Inspection. Upon reasonable notice Lessors and Lessors' agents
and representatives shall have the right to enter into or upon the Leased
Premises, or any part thereof at all reasonable hours for the purpose of
examining the same.
10. TRANSFER OF OWNERSHIP
10.1 Lessors' Right. Lessors' right to assign this Lease or sell or
convey the Leased Premises is and shall remain unqualified. Upon any said
assignment, sale or conveyance, and the assumption for the benefit of Tenant of
all the Lessors' obligations hereunder, the assigning, selling or conveying
Lessors shall not be subject to any liability resulting from any act or omission
or event occurring after said assignment, sale or conveyance.
<PAGE>
10.2 Tenants Right. Tenant shall not assign or transfer this lease
without the written consent of Lessors except for transfer to a wholly owned
subsidiary. Lessors shall not reasonably refuse a request for such assignment as
long as Tenant remains obligated under the terms and obligations of this lease.
10.3 Successors. This Lease and the terms, conditions and covenants
herein contained shall inure to the benefit of arid be binding upon Lessors,
their successors and assigns, and shall inure to the benefit of and be binding
upon Tenant and its successors and permitted assigns.
11. BANKRUPTCY; INSOLVENCY
If at any time after the date this Lease is entered in, (1) any
proceedings in bankruptcy, insolvency or reorganization shall be instituted
against Tenant pursuant to any federal or state law now or hereafter enacted, or
any receiver or trustee shall be appointed for all or any portion of Tenant's
business or property, or any execution or attachment shall issue against Tenant
or Tenant's business or property or against the leasehold estate created hereby
and any of said proceedings, process or appointment be not discharged and
dismissed within sixty (60) days from the date of said filing, appointment or
issuance; or (ii) Tenant shall be adjudged as bankrupt or insolvent, or Tenant
shall make assignment for the benefit of creditors, or Tenant shall file a
voluntary petition in bankruptcy or petition for or enter into an arrangement
for reorganization, composition or any other arrangement with Tenant's creditors
under any federal or state law now or hereafter enacted, or this Lease or the
estate of Tenant herein shall pass to or devolve upon, by operation of law or
otherwise, anyone other than Tenant except as herein provided, the occurrence of
any one of said contingencies shall be deemed to con constitute and shall be
construed as a repudiation by Tenant of Tenant's obligations hereunder and shall
cause this Lease to be terminated; and upon said termination Lessors shall have
the immediate right to reenter the Leased Premises and to remove all persons and
property therefrom and this Lease shall not be treated as an asset of the
Tenant's estate and neither the Tenant nor anyone claiming by, through or under
Tenant by virtue of any law or any order of any court shall be entitled to the
possession of the Leased Premises or to remain in the possession thereof. Upon
the termination of this Lease, as aforesaid, Lessors shall be entitled to
exercise such rights and remedies to recover from Tenant as damages such amounts
as are specified in Section 18 hereof as payable to Lessors upon termination,
unless any statute or rule of law governing the proceedings in which such
amounts are to be proved shall lawfully limit the amount of such claims capable
of being proved, in which case Lessors shall be entitled to recover, as and for
liquidated damages, the maximum amount which may be allowed under any said
statute or law.
12. DEFAULT
12.1 Tenant's Breach. Should Tenant breach any of the terms of this
Lease including the covenant to pay rent and to make all payments and perform
all obligations of Tenant to "Legred" under the terms of that certain agreement
between the Tenant and "Legred" dated the 2ND day of NOVEMBER 1999, Lessors
shall give Tenant written notice of such breach and Tenant shall immediately
commence to cure such breach, and shall diligently proceed with and complete the
curing of such breach within thirty (30) days. If such breach is not cured
within the thirty (30) day period, Lessors, at its option, is entitled to
terminate this lease and obtain a return of and possession of the Leased
Premises and all improvements thereon.
<PAGE>
13. RE-ENTRY
13.1 Lessors' Option. Upon re-entry Lessors may:
(I) terminate this Lease and/or
(ii) terminate Tenant's right to possession on part or all at the
Leased Premises.
13.2 Costs of Re-entry. Upon such re-entry, whether or not Lessors
shall terminate this Lease, Tenant shall pay to Lessors upon demand (I) all
rent, additional rent and any other amount due to Lessors at the time of
re-entry and (ii) all costs and expenses incurred by Lessors to effect such
reentry, including without limitation, repairs to any damages sustained by the
Leased Premises as a consequence of such re-entry and Lessors attorney fees
incurred in obtaining a right of re-entry. No such re-entry shall he deemed a
termination of this Lease unless Lessors notify Tenant that this Lease is
terminated; and any such termination shall be effective only as of the date set
forth in such notice.
14. TERMINATION
14.1 Expiration of Term. Unless otherwise renewed, extended or
terminated, this Lease shall terminate the 2ND day of Nov. ,2099.
14.2 Condition of Premises. On the last day of the term of this Lease
or on the sooner termination thereof, Tenant shall peaceably surrender the
Leased Premises broom-clean and in good repair and condition.
14.3 Removal of Tenant's Property. If Tenant shall vacate or surrender
the Leased Premises after the termination of this Lease without removing all of
Tenants personal property Lessors may, in Lessors sole discretion, elect to
treat such property as having been abandoned by Tenant and, in such event.
Tenant hereby authorizes Lessors to dispose of such property without advance
notice to Tenant. Upon demand, Tenant shall reimburse Lessors for all such costs
of disposal.
15. ELECTION OF REMEDIES/NON-WAIVER
No remedy provided hereunder. shall be deemed an exclusive remedy and
the election of any such remedy shall not bar pursuit of any other remedy or any
combination thereof, or subsequent seeking of the same remedy for other damages
or otherwise, whether available hereunder or existing at law or in equity. No
waiver of any breach of any covenant, condition or agreement herein contained
shall operate as a waiver of any subsequent breach thereof. No reentry of
Lessors, and no acceptance by Lessors of keys from Tenant, shall be considered
an acceptance of a surrender of the Lease, unless so stated in writing by
Lessors.
16. QUIET ENJOYMENT
Lessors warrant that it has the right to lease the Leased Premises and
that so long as Tenant shall perform each and every term, condition and covenant
to be performed and observed by Tenant hereunder, Tenant shall have peaceful and
quiet use and possession, of the Leased Premises without hindrance on the part
of Lessors. Lessors rent the Leased Premises to Tenant as is without any
warranties to suitability for fitness or purpose and without
<PAGE>
any other warranties except as herein expressed.
17. SHORT-FORM LEASE
Each party hereto agrees that it shall, upon the request of the other
given at any time during the Term of this Lease, execute, acknowledge and
deliver to the other a short form of lease meeting the requirements of the laws
of the State of Minnesota in recordable form. Preparation and recording shall be
done by Lessors and charges therefor, as well as for documentary stamps or like
tax, shall be paid for by the requesting party. The terms of such short form, if
executed, shall constitute a part of this Lease as though recited herein.
18. NOTIFICATION
Whenever any notice ("Notice") shall or may be given by one party to
the other, such Notice shall be in writing and addressed to the parties at their
respective addresses as set forth in this Agreement and served by (1) a
nationally recognized overnight express courier, or (ii) registered or certified
postage paid mail return receipt requested. The date the Notice is received
shall be the date of service of Notice. In the event an addressee refuses to
accept delivery, however, then Notice shall be deemed to have been served on
either (i) the next business day after the Notice was sent in the case of
attempted delivery by overnight courier, or (ii) five (5) business days after
mailing the notice in the case of registered or certified mail. Either party
may, at any time, change its Notice address by giving the other party Notice
thereof, in accordance with this paragraph "18".
19. TIME OF ESSENCE
Lessors and Tenant agree that time is of the essence in the Lease and
the performance and payment of each and every obligation herein.
20. CONTRACT INTERPRETATION
20.1 Captions; Meanings. The section captions and headings herein are
for convenience and reference only and do not limit or construe the provisions
hereof. When the context so requires, the neuter gender includes the masculine
and/or feminine; and the singular includes the plural.
20.2 Entire Agreement. This Lease represents the entire agreement
between the parties hereto, and there are no agreements, understandings or
undertakings except as set forth herein. All prior negotiations and writings
between the parties and their representatives are superseded hereby. This Lease
may not be amended, modified or supplemented except by a writing, duly and
properly executed, and no term, condition or covenant hereof may be waived other
than by such writing.
20.3 Applicable Law; Severability. The validity, performance,
interpretation and enforcement of this Lease shall be governed by the laws of
the State of Minnesota. If any provision of this Lease, or portion thereof; or
the application thereof to any person or circumstance shall, to any extent, be
held by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Lease shall not be affected thereby and each provision of this
Lease shall be valid and enforceable to the fullest extent permitted by law.
<PAGE>
21. AUTHORITY
Each individual executing this Lease on behalf of a corporation or
organization represents and warrants that they are duly authorized to execute
and deliver this Lease on behalf of said corporation or organization and that
this Lease is a valid and binding obligation of said corporation or organization
in accordance with the terms hereof.
22. MISCELLANEOUS
22.1 No Partnership. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Lessors and
Tenant or to create any other relationship between the parties hereto other than
that of Landlord and Tenant,
22 .2 Brokers. Lessors and Tenant each represent and warrant one to
another that except as hereinafter set forth neither of them has employed any
broker in carrying on the negotiations relating to this Lease, Lessors shall
indemnify and hold Tenant harmless and Tenant shall indemnify and hold Lessors
harmless from and against any claim or claims for brokerage or other commission
arising from or out of any breach of the foregoing representation and warranties
by the respective indemnitors.
IN WITNESS WHEREOF the parties have executed this Agreement on the dates
indicated below.
LESSORS TENANT
STRUTHERS, INC.
/S/ BRENT LEGRED
Brent Legred
BY: ____________________
______________________ Its _____________________
Julie Legred
STATE OF MINNESOTA
SS
COUNTY OF FARIBAULT
On this __ day of ___________, 1999, before me, a notary public within
and for said County and State personally appeared Brent Legred and Julie Legred,
to me known to be the persons described in and who executed the foregoing
instrument and acknowledged that they executed the same as their free act and
deed.
------------------------
Notary Public
<PAGE>
STATE OF
SS
COUNTY OF
The foregoing instrument was acknowledged before me this ___ day of
_____________ 1999. by _________________ and _________________,the ____ ________
and _________________ of Struthers. Inc., a corporation under the laws of ______
___________ on behalf of Struthers, Inc.
--------------------------
Notary Public
This instrument was drafted by:
Charles K. Frundt
FRUNDT & JOHNSON, LTD.
117 West 5th St.
P.O. Box 95
Blue Earth, MN 56013
<PAGE>
EXHIBIT "A"
The Northwest Corner of the Southwest Quarter of Section Nineteen (19) in
township One Hundred One (101) North, Range Twenty-five (25) West of the Fifth
Principal Meridian in the County of Faribault and State of Minnesota.
A tract commencing at the Southwest corner of the Southwest Quarter of the
Northwest Quarter of said Section Nineteen (19), running thence East 39 rods,
hence North 24 rods, thence West 39 rods, thence South 24 rods to the point of
beginning.
Excepting from the above two tracts the following described premises:
A tract of land in the Southwest Quarter of the Northwest Quarter and
the Northwest Quarter of the Southwest Quarter of Section 19, Township
101 North, Range 25 West in Faribault County, Minnesota described as
follows:
Beginning at the Southwest corner of the Northwest Quarter of
Section 19, Township 101 North, Range 25 West in Faribault
County, Minnesota; thence South 0 degrees 00 minutes 00
seconds West (assumed bearing) along the West line of the
Southwest Quarter a distance of 75.92 feet thence North 90
degrees 00 minutes 00 seconds East a distance of 503.00 feet
to an iron pipe survey marker; thence North 0 degrees 00
minutes 00 seconds East a distance of 471.92 feet, more or
less, to the North line of the South 396.00 feet of the
Southwest Quarter of the Northwest Quarter of Section 19;
thence Westerly along the North line of the South 396.00 feet
of the Southwest Quarter of the Northwest Quarter a distance
of 503.00 feet to the West line of the Northwest Quarter;
thence South 0 degrees 00 minutes 00 seconds West along the
West line of the Northwest Quarter a distance of 396.00 feet
to the point of beginning. Subject to an easement for public
roadway right-of-way along the West line of Section 19.
<PAGE>
EXHIBIT "B"
A tract of land in the Southwest Quarter of the Northwest Quarter and the
Northwest Quarter of the Southwest Quarter of Section 19, Township 101 North,
Range 25 West in Faribault County, Minnesota described as follows:
Beginning at the Southwest corner of the Northwest Quarter of
Section 19, Township 101 North, Range 25 West in Faribault
County, Minnesota; thence South 0 degrees 00 minutes 00
seconds West (assumed bearing) along the West line of the
Southwest Quarter a distance of 75.92 feet; thence North 90
degrees 00 minutes 00 seconds East a distance of 503-00 feet
to an iron pipe survey marker; thence North 0 degrees 00
minutes 00 seconds East a distance of 471.92 feet, more or
less, to the North line of the South 396.00 feet of the
Southwest Quarter of the Northwest Quarter of Section 19;
thence Westerly along the North line of the South 396.00 feet
of the Southwest Quarter of the Northwest Quarter a distance
of 503.00 feet to the West line of the Northwest Quarter;
thence South 0 degrees 00 minutes 00 seconds West along the
West line of the Northwest Quarter a distance of 396.00 feet
to the point of beginning. Subject to an easement for public
roadway right-of-way along the West line of Section 19.
Said tract contains 5.45 acres, more or less, including the aforementioned
easement.
<PAGE>
EXHIBIT C
1995 Ford F250 4x4 Pickup 1985 Chevy 4x4 Pickup 1992 Buick Skylark 1975 Chev.
converted bus A/C 7040 Tractor IH "H" Tractor Balzer Slurry Vacuum Wagon
Hydralic Trailer Hydralic Trailer Hillsboro 24' Livestock Trailer Hillsboro 18'
Livestock Trailer Chaperal 12' LivestockTrailer
Swine Breeding Stock Production (Great Grandparent)
Unit - including 300 GGP sows and 100 stud boars together with all offspring
there, of which includes 50+ stud boars for new stud (approx. 3000 in total)
<PAGE>
EXHIBIT "D"
Customer List on disc
<PAGE>
COOPERATION AGREEMENT
(hereinafter called "the Agreement")
between
Norsvin International AS
Postboks 2043 Haraldstad
N-2301 Hamar
Norway
registered in Hamar, Norway, enterprise no NO-965216383
(hereinafter referred to as "Norsvin International")
and
Legred Genetics, Inc.
3500 490th Avenue
Bricelyn, MN 56014
United States of America
registered in the State of Minnesota
(hereinafter referred to as "Legred").
Whereas Norsvin International is Norwegian private limited company that aims at
development, marketing, sales and distribution of Genetic Materials and
Technology, as well as know-how related to artificial insemination, produced by
NORSVIN; the latter is the Norwegian Pig Breeders' Association, acknowledged by
the European Economic Area as the formal and sole administrator of the Norwegian
herdbook registers of the pig breeds Landrace, Yorkshire and Duroc, and has
granted to Norsvin International the exclusive and unlimited right to Exploit is
Technology and sell the Genetic Materials from its reeding centres in and
outside Norway, whereas "Legred" is a privately held corporation duly organized
under the laws of the State of Minnesota, United States of America, which aims
at development, production, marketing, sales and distribution of Breeding Pigs
and their semen in the Territory.
Norsvin International and Legred wish to develop a cooperation in order to
Exploit Genetic Materials and Technology from Norsvin in the Territory.
Norsvin International and Legred therefore agree as follows:
<PAGE>
CONTENTS
1. Definitions
2. Subject
3. Norsvin International's obligations
3.1 Genetic Materials from Norsvin International
3.2 Warranty
3.3 Technology from Norsvin International
3.4 Official approval
3.5 Marketing support and assistance
3.6 Information
3.7 Obligation to supply
3.8 Limited liability
4. Legred's obligations
4.1. Exploitation
4.2 Royalties
4.3 Legred's legal status
4.4 Sales organization, stock and claims
4.5 Marketing
4.6 Market information
4.7 Obligation to purchase
4.8 Resale prices
4.9 Phasing-out after termination of the Agreement
5. Sales conditions
5.1 General sales conditions
5.2 Specific sales and conditions
6. Payment of royalties
6.1 Royalties on Breeding Pigs
6.2 Royalties on semen
6.3 Exclusion of royalties on the GGP and GP levels
6.4 Payment of royalties
6.5 Further provisions
7. Confidentiality, assistance against unfair competition, and cooperation
against infringement of intellectual property rights
7.1 Confidentiality
7.2 Unfair competition
7.3 Infringement of intellectual property rights
7.4 Transfer of obligations
8. Duration of the Agreement
8.1 Duration
8.2 Cancellation
8.3 Written notice
8.4 Indemnity, damages
<PAGE>
9. Law and dispute
9.1 Applicable law
9.2 Compliance with national laws
9.3 Arbitration
10. Final provisions
10.1 Previous agreements
10.2 Invalid provision
10.3 Modifications and Waivers
10.4 Force majeure
10.5 Prohibition to assign
10.6 Language
11. Enforcement
Appendix 1. General Sales Conditions of Norsvin International
Appendix 2. Modifications and waivers
Appendix 3. Compliance of this Agreement with the anti-trust laws of the United
States of America
<PAGE>
1. DEFINITIONS
AI Boar shall mean a male pig destined for he production of semen to be used for
artificial insemination of female pigs.
BREEDING PIG shall mean a male or female pig destined for the production of
other pigs.
DELIVERY FOR IMMEDIATE SLAUGHTER shall mean delivery of a pig to a third party
that exploits facilities for the slaughtering of pigs, with the express purpose
that the pig shall b slaughtered in these facilities within two days from the
date of delivery, without delivery to any other parties in the meantime.
DERIVED PRODUCTS shall mean Genetic Materials directly or indirectly derived
from the Products, to be Exploited by Legred in the Territory.
TO EXPLOIT shall mean to exploit Genetic Materials and/or Technology and the
results of such, in particular to produce, to reproduce, to use, and to sell.
EXPLOITATION shall mean the right the Exploit.
GENETIC MATERIALS shall mean Breeding Pigs, their semen and/or their embryos.
GRANDPARENT (GP) BREEDING PIG shall mean a Breeding Pig destined for the
Production of Parent Breeding Pigs.
GREAT-GRANDPARENT (GGP) BREEDING PIG shall mean a Breeding Pig destined for the
production of GP and/or GGP Breeding Pigs.
MULTIPLIER shall mean a USA farmer who receives GP Breeding Pigs and/or semen
from Legred for the production of parent Breeding Pigs to be sold in the
Territory.
NORSVIN shall mean Norsk Svincavlslag, the Norwegian Pig Breeders' Association,
the formal administrator of the Norwegian herdbook registers of the pig breeds
Landrace, Yorkshire and Duroe, which has granted to Norsvin International the
exclusive the unlimited right to Exploit its Technology and sell the Genetic
Materials form its breeding centres in and outside Norway,
PARENT BREEDING PIG shall mean a cross bred Breeding Pig destined for the
production of slaughter pigs.
PARTY shall mean Legred and/or Norsvin International.
PRODUCTS shall mean Genetic Materials produced by, or produced under the control
of, NORSVIN and its members, delivered by Norsvin International to Legred.
TECHNOLOGY shall mean Norvin International's know-how and methodology related to
pig breeding and reproduction, including its updating, pat at Legred's disposal
for the purpose of this Agreement.
TERRITORY shall mean the geographical area of the United States of America and
Mexico.
2. SUBJECT
In general, Norsvin International shall supply Legred with Products, and shall
put its Technology related to pig breeding and reproduction at Legred's
disposal; Legred shall Exploit Norsvin International's Products and Technology
in its crossbreeding program for the purpose of producing Derived Products to be
sold in the Territory.
Hence Norsvin International grants to Legred the non-exclusive distributorship
for its Derived Products in the Territory.
In particular, Norsvin International shall supply Legred with AI Boars, and
Legred shall Exploit the semen produced by these boars for five purposes:
(1)To inseminate female GGP Breeding Pigs in Legred's breeding facilities, for
the purpose of producing GGP Breeding Pigs that carry genes derived form
NORSVIN'S Genetic Materials; hence NORSVIN'S Genetic Materials are immigrated
into Legred's genetic populations and these populations become linked to
NORSVIN'S genetic improvement.
<PAGE>
(2) To inseminate female GGP Breeding Pigs in Legred's breeding facilities, for
the purpose of producing GP Breeding Pigs that carry genes derived from
NORSVIN'S Genetic Materials, to be Exploited (in the facilities of Legred or of
Legred's contracted Multipliers) for the production of Parent Breeding Pigs to
be sold in the Territory.
(3) To inseminate female GP Breeding Pigs in Legred's breeding facilities, for
the purpose of producing Parent Breeding Pigs that carry genes derived from
NORSVIN'S Genetic Materials to be sold in the Territory.
(4) To inseminate female GP Breeding Pigs in the breeding facilities of Legred's
contracted Multipliers, for the purpose of producing Parent Breeding Pigs that
carry genes derived from NORSVIN'S Genetic Materials, to be sold in the
Territory.
(5) To inseminate female Parent Breeding Pigs of Legred's customers,
for the production of slaughter pigs in the Territory.
The Derived Products to be sold in the Territory by Legred or Legred's
contracted Multipliers therefore primarily comprise Parent Breeding Pigs that
carry genes derived from NORSVIN'S Genetic Materials and semen of such pigs, all
sold for the purpose of producing slaughter pigs.
Norsvin International and Legred may at any time agree upon other ways to
Exploit the Products, as mentioned in clause 4.1 of this Agreement.
3. NORSVIN INTERNATIONAL'S OBLIGATIONS
3.1. GENETIC MATERIALS FROM NORSVIN INTERNATIONAL
Norsvin International shall supply Legred with Genetic Materials. The genetic
quality of these pigs for production traits (growth rate, feed intake-related
traits, backfat thickness, muscle dimensions) and reproduction traits (litter
size at farrowing) shall be quantified in terms of NORSVIN'S standard breeding
value estimation procedures for such traits.
3.2. WARRANTY
Measured over calendar years, the average genetic quality of these pigs shall be
equal to, or better than, the average genetic quality of pigs of the same sex
and bred that are selected for breeding on the nucleus levels in NORSVIN'S
schemes for production and genetic improvement of Breeding Pigs in Norway.
3.3 TECHNOLOGY FROM NORSVIN INTERNATIONAL
Upon request, Norsvin International shall provide Legred with any available
Technology (knowhow and methodology) in the following fields:
- - sow performance recording
- - on-farm testing methods
- - appraisal of exterior traits
- - recording of data on farm computer
- - breeding value estimation for production and reproduction traits, and
calculation of selection indexes, making use of NORSVIN standard
procedures as mentioned in clause 3.1
- - artificial insemination (semen collection and processing,
insemination techniques, management of AI Boars)
<PAGE>
- - breeding plans (design of crossbreeding structure, mating plans,
replacement policy in nucleus and Multiplier)
- - product evaluation.
Norsvin International shall provide such Technology at cost. Labour and social
costs pertaining to such support activities will not be charged to Legred, but
Legred shall cover the costs of travelling and of board and lodging that occur
when Norsvin International or NORSVIN staff must perform such support activities
outside Norway at Legred's request.
3.4 OFFICIAL APPROVAL
Norsvin International undertakes to supply Products which satisfy necessary
requirements in respect of mandatory official approval and standard which are
stipulated by the relevant authority upon information form Legred. Norsvin
International shall have the right to withdraw a Product from this Agreement
when it has no interest in such approval or standard for such Product.
Legred shall take the initiative to obtain approval of the Products when such
approval is necessary for import, Exploitation and distribution in the Territory
and in general for the performance of this Agreement. The costs connected with
such approval shall be covered by Legred.
3.5 MARKETING SUPPORT AND ASSISTANCE
Norsvin International shall give Legred assistance for the marketing of the
Derived Products in the Territory by:
- - giving Legred all available technical information concerning the
characteristics and specifications of the Products
- - informing Legred of developments and marketing in other markets that
might be of use for Legred's own marketing efforts.
3.6 INFORMATION
Norsvin International shall inform Legred in due time of any significant
reduction of production, difficulties in delivery, or modification of the
Products which may have a bearing on the export of the Products to the
Territory, or on the Exploitation of the Products or of the Derived Products in
the Territory.
3.7. OBLIGATION TO SUPPLY
Norsvin International shall have an obligation to supply at least the minimum
quantities agreed in the annual budget, as mentioned in clause 4.7 of this
Agreement.
3.8 LIMITED LIABILITY
Norsvin International shall not be liable for Legred's loss of profits,
business, revenue, goodwill or anticipated savings or for special indirect or
consequential loss arising out of the use by Legred or by other parties or
NORSVIN'S Genetic Materials or Norsvin International's Technology.
<PAGE>
4. LEGRED'S OBLIGATIONS
4.1. EXPLOITATION
The Products shall be Exploited by Legred primarily as GGP or GP Breeding Pigs,
for and in its company and its contracted Multipliers. The Products shall not be
sold, given away, or made available in any other way to other parties, other
than by Delivery for Immediate Slaughter. When the Parties agree upon this, the
Products may also be Exploited as Parent Breeding Pigs.
Once a year (before 01 November) Legred shall send to Norsvin International a
report over the preceding 12 months on the breeding-related aspects of the GGP
and GP breeding populations of Legred and Legred's contracted Multipliers,
describing:
- - The population structure in terms of numbers of animals, distribution of
sires and dams over the sow herds, distribution of parity numbers over the
slow herds.
- - Phenotypic performance levels of growth and carcass traits, sow fertility
traits and longevity-related traits.
- - A genetic plan for the coming year. This plan shall explicitly cover the
design of Legred's crossbreeding structure and Legred's product design on
the GP and parent breeding level.
Following this genetic plan, and before 31 December of the same year, Norsvin
International and Legred shall together define, and agree upon in writing, the
Exploitation plan for Norsvin International's Genetic Materials in Legred's
crossbreeding structure and product design for the coming year. Each of the
Parties shall work together for the purpose of arriving at such exploitation
plan.
Legred shall keep Norsvin International informed about any significant
deviations from this Exploitation plan that may occur.
4.2. ROYALTIES
Because the Products shall be made available by Norsvin International to Legred
at the domestic Norwegian price (as regulated in clause 5.2.1), and because
Technology shall be made available by Norsvin International to Legred at cost
(as regulated in clause 3.3), the supply by Norsvin International of Genetic
Materials and Technology to Legred (as regulated in clauses 3.1 to 3.3) in
subject to the payment by Legred of royalties to Norsvin International (as
regulated in clause 6)
as long as this Agreement is in effect.
4.3 LEGRED'S LEGAL STATUS ACCORDING TO THIS AGREEMENT
Legred buys and sells in its own name and for its own account, and acts as
independent trader as regards both Norsvin International and its customers.
Legred shall effectively promote the sale of the Derived Products in the
Territory, without being authorized to act in the name of Norsvin International.
Furthermore, Legred shall safeguard the interest of Norsvin International with
the true diligence of a responsible businessman.
4.4 SALES ORGANIZATION, STOCK AND CLAIMS
Legred has and shall at all times have an appropriate, efficient and competent
sales organization. Legred shall be responsible for an effective distribution
and marketing of the Derived Products in the Territory.
<PAGE>
Legred shall maintain adequate stocks of the Products and of the Derived
Products to enable prompt deliveries of the Derived Products to customers within
the Territory.
Legred shall deal promptly with any claim. Legred shall inform Norsvin
International of any claim which could endanger the image of Norsvin
International, the Products, or the Derived Products.
4.5 MARKETING
Legred is entitled to appoint qualified independent traders or agents for the
sale of the Derived Products. Legred shall be entirely and exclusively
responsible or the activities of these traders and agents for the consequence of
an eventual termination of their contractual relationships.
Legred shall at its expense undertake appropriate advertising, participation in
fairs and other promotional activities in order to secure the maximum sale of
the Derived Products.
Legred shall not participate in international fairs if Norsvin International, or
one of its other distributors covering the relevant territory, is thereby
executed from participating to such fairs. The Parties shall inform each other
in good time of any planned participation in international fairs in the
Territory.
The Derived Products shall be promoted and sold under a trade name and a trade
mark to be agreed upon between the Parties before 15 July 1996. This trade name
and trade mark shall be based upon the term Norsvin(TM). Legred shall not use
this trade name or trade mark for any purpose other than the promotion and sale
of the Derived Products, and shall not use the trade name or the trade mark
after the termination of this Agreement.
The Derived Products shall be promoted and sold making use of NORSVIN'S logo as
it appears on the first page of this Agreement.
Legred shall be entitled to develop and use a trade name and trade mark which it
shall own and which it may continue to use after the termination of this
Agreement.
4.6 MARKET INFORMATION
Legred shall keep Norsvin International informed of its marketing activities as
well as of the market conditions within the Territory.
Legred shall keep Norsvin International informed of relevant regulations that
may have a bearing on the quality of the Products or of the Derived Products,
and give advice to improve the quality for sales in the Territory.
Once a year (before 01 November) Legred shall send to Norsvin International a
report on the numbers of Derived Products (pigs, semen doses, and embryos) sold
during the previous 12 months from the facilities of Legred and of Legred's
contracted Multipliers. This report shall also describe economic and competitive
factors and market developments, and a present sales forecast for the coming
year.
<PAGE>
4.7. OBLIGATION TO PURCHASE
Following the sales forecast mentioned in clause 4.6, and before 31 December of
the same year, Legred shall make a quantitative budget for the Products to be
supplied by Norsvin International to Legred during the coming year.
Legred shall have an obligation to purchase at least the quantities agreed in
this annual budget.
4.8 RESALE PRICES
Legred shall be free to fix its sales prices of the Derived Products. It shall
aim to keep a price level which ensures the competitive edge of the Derived
Products and an optimum coverage of the market. It shall particularly take
account of the prices of similar and competitive products int the Territory.
Legred shall make no guarantee, express or implied, as to the quality of the
Products or of the Derived Products, other than an approved by Norsvin
International in writing and shall defend, indemnify and hold Norsvin
International harmless with respect to any claim or suit relating to the
non-compliance with any guarantee conditions not so approved.
4.9. PHASING-OUT AFTER TERMINATION OF THE AGREEMENT.
If this Agreement is terminated or cancelled for any reason, Legred shall not
sell, give away, or make available in any other way, Breeding Animals carrying
50% or more genes that derive from NORSVIN'S Genetic Materials, other than by
Delivery for Immediate Slaughter, or by sale to Norsvin International at the
current Minnesota market value,
If this Agreement is terminated or cancelled for any reason, Legred shall not
sell, give away or make available in any other way, semen produced by Breeding
Animals carrying more than 50% genes that derive form NORSVIN'S Genetic
Materials.
5. SALES CONDITIONS
5.1. GENERAL SALES CONDITIONS
All sales between Norsvin International and Legred are based on the "General
Sales Conditions of Norsvin International", as attached to Appendix 1 of this
Agreement (where "the customer" shall refer to Legred for the purposes of this
Agreement), unless specific conditions have been agreed between the Parties as
regulated in clause 5.2.
Norsvin International reserves the right to unilaterally change its General
Sales Conditions at its sole discretion upon three months written notice. Such
change shall be the same for, and universally effect, all of Norsvin
International's customers both inside and outside Norway.
Norsvin International shall have the right to modify its prices, General Sales
Conditions and specific sales conditions with immediate effect in the cases
described in clause 8.2 of this Agreement when Norsvin International would
prefer not to cancel the Agreement but to continue the contractual relationship
subject to new conditions.
<PAGE>
5.2. SPECIFIC SALES CONDITIONS
In deviation of the general sales conditions mentioned in clause 5.1, only the
following two specific sales conditions have been agreed between the Parties:
5.2.1 PRICE
<PAGE>
Instead of article 10 of the General Sales Conditions the following shall apply:
Pigs and semen are sld by Norsvin International to Legred at the domestic
Norwegian price (i.e. the price charged to Norwegian pig producers for the
corresponding products of NORSVIN and its breeding centers; this price is
much lower than Norsvin International's regular export prices), to which
are added the real costs of selection (travel, board and lodging, labour,
export compensation), insurance, veterinary treatment and declarations,
transport between reeding farms and quarantine, (housing, feed, labour),
transport between quarantine and forwarding airport, packing, customs,
transito, and freight between forwarding airport and airport of
destination.
5.2.2. APPLICABLE LEGISLATION
Instead of articles 19 and 20 of the General Sales Conditions the following
shall apply:
These conditions and any related sales agreement shall be governed by the
Convention on Contracts for the International Sale of Products of 1980
(which has been ratified by the United States of America and by Norway),
supplemented, when insufficient, by the laws of Ontario, Canada, for legal
fields outside the scope of this convention.
6. PAYMENT OF ROYALTIES
6.1. ROYALTIES ON BREEDING PIGS
As long as this Agreement is in effect, and as regulated in clause 4.2, Legred
shall pay a royalty to Norsvin International for each pig or pig embryo that is
a Derived Product (i.e. that has been directly or indirectly derived from
Genetic Materials supplied by Norsvin International), and that is sold b Legred
and/or by its Multipliers as a Breeding Pig to other parties. The royalties
shall be four percent of the sales price paid to Legred, FOB at the final
production site of such pigs or pig embryos, less all taxes and fees required to
be paid as a result of such sale at the time of or after delivery.
6.2 ROYALTIES ON SEMEN
As long as this Agreement is in effect, and as regulated in clause 4.2, Legred
shall pay a royalty to Norsvin International for each dose of semen that is a
Derived Product (i.e. that has been produced by pigs supplied by Norsvin
International, or by pigs directly or indirectly derived from Genetic Materials
supplied by Norsvin International), and that is sold by Legred and/or by its
Multipliers to other parties. The royalties shall be four percent of the sales
price paid to Legred, FOB at the final production site of such semen, less all
taxes and fees required to be paid as a result of such sale at the time of or
after delivery.
<PAGE>
6.3 EXCLUSION OF ROYALTIES ON THE GGP AND GP LEVELS
Legred shall not pay royalties for Derived Products produced by GP Breeding Pigs
delivered to Legred's contracted Multipliers for the production of Parent
Breeding Pigs, nor for Derived Products of GGP Breeding Pigs Exploited in
Legred's own nucleus herds.
6.4. PAYMENT OF ROYALTIES
Royalties shall be paid twice a year, before 15 January and before 15 July, for
royalties due the immediate prior 31 December and 30 June, respectively.
Royalties shall be calculated in US Dollars, and transferred in Norwegian
Kroner, using the exchange rate of the day of transfer. Legred shall not be
liable to Norsvin International for payment of any sums other than the royalties
described in clauses 6.1 and 6.2.
6.5 FURTHER PROVISIONS
Royalties are subject to the supply by Norsvin International of Genetic
Materials and Technology to Legred as regulated in clauses 3.1 to 3.3 of this
Agreement, and shall be paid unless in case of Norsvin International's material
(i.e. fundamental) breach of contract.
There shall be no minimum amount of sales required by Legred, and Legred shall
not be liable if sales do not meet Norsvin's International expectations.
The Parties agree that Legred's Multipliers are independent contractors and will
not be authorized to sell Derived Products without selling the same through
Legred, or paying Legred therefor. Receipts by Legred's Multipliers shall not be
considered "sales price paid to Legred" for the purpose of clauses 6.1. and 6.2.
Expenses paid by Legred in order to recover loss of revenue from unauthorized
sales of Derived Products by Legred's Multipliers shall be considered "fees to
be paid as a result of sales" for the purpose of clauses 6.1 and 6.2.
7. CONFIDENTIALITY, ASSISTANCE AGAINST UNFAIR COMPETITION, AND COOPERATION
AGAINST INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
7.1 CONFIDENTIALITY
The Parties agree to take all appropriate steps to prevent disclosure of
Technology and confidential information. The Parties undertake to show all
necessary discretion in accordance with good business practice in relation to
third parties with regard to all questions connected with this Agreement. The
obligations under this clause shall subsist during the term of this Agreement as
well as thereafter, provided that the Technology or confidential information
shall not meanwhile have become common knowledge.
7.2. UNFAIR COMPETITION
Each Party shall promptly inform the other of all acts of unfair competition
against the other which come to its notice, and give the necessary assistance
against it.
<PAGE>
7.3. INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
Neither Party shall infringe the other Parties' intellectual property rights.
This obligation shall apply even after the expiration of this Agreement. Either
Party shall promptly inform the other Parties about all infringement of the
others' rights in the first Party's country. The Parties shall assist each other
to the best of their abilities to protect each other against infringement.
7.4 TRANSFER OF OBLIGATIONS
The Parties shall pledge their employees in writing to obligations of
confidentiality, non- infringement of intellectual property rights, and
prohibition to use Technology. The same shall apply to parent and sister
companies and subsidiaries, and contractors (including contracted Multipliers),
when these are in charge of activities related to this Agreement and receive
Technology and/or confidential information. Such writing shall contain a
sanction clause which shall be sufficient to discourage any breach of such
obligations.
8. DURATION OF THE AGREEMENT
8.1 DURATION
This Agreement is concluded for an indefinite period unless terminated with no
less than 12 months written notice. The end of the period of notice shall
coincide with the end of a calendar year.
8.2. CANCELLATION
8.2.1 REASONS FOR CANCELLATION.
This Agreement may be cancelled with immediate effect by either party, if
the other party:
- - become insolvent, or enters into liquidation, or enters into receivership,
or if a petition in bankruptcy is filed by or against it, or if it accepts
a composition scheme with its creditors, or ceases doing business;
- - breaches any material (i.e. fundamental) term or condition of this
Agreement, or fails to perform any obligation hereunder, and does not
rectify such breach or default within the time period stipulated by the
other party by written notice. This time period shall not be less than 60
days:
- - if the quality of Genetic Materials supplied by Norsvin International to
Legred does not meet the standards needed by Legred to compete with other
genetic materials in the Territory.
8.2.2. DEFAULT PAYMENT
This Agreement may be cancelled with immediate effect by Norsvin
International if Legred defaults in due payment and does not rectify this
default within 30 days.
<PAGE>
8.2.3 CHANGE OF CONTROL.
This Agreement may be terminated with immediate effect by Norsvin International
if:
- - one of Norsvin International's competitors should get, directly or
indirectly, controlling influence over Legred's business or a controlling
interest in Legred's company;
- - Legred should get, directly or indirectly, controlling interest in a
company that is directly competing with Norsvin International, unless such
acquisition is for the purpose of incorporating such company into Legred.
8.2.4 DISAGREEMENT ON EXPLOITATION.
This Agreement may be terminated with immediate effect by either Party in the
event that the Parties fail to agree upon Exploitation plans as provided for in
clause 4.1.
8.2.5. CHANGE OF NORSVIN INTERNATIONAL'S GENERAL SALES CONDITIONS
This Agreement ma be terminated with immediate effect by Legred if Norsvin
International changes its prices or General Sales Conditions (as regulated in
clauses 5.1 and 5.2) in a way that is unacceptable for Legred.
8.2.6. CONTINUATION OF BUSINESS
Nothing in this Agreement shall prevent Legred from continuing in the business,
development, production, marketing, sales and distribution of Breeding Pigs and
their semen in the Territory after the termination of this Agreement. Legred
shall not, after termination of this Agreement, use the Norsvin-based trade name
or trade mark described in clause 4.5, nor NORSVIN'S logo as it appears on the
first page on this Agreement.
8.3 WRITTEN NOTICE
Cancellation or termination notice shall be given by telefax and confirmed by
registered letter, and the date of receipt shall be the date of the telefax.
8.4. INDEMNITY, DAMAGES
No claim for compensation can be lodged by reason of termination of this
Agreement, except where such claim is based on a substantial breach of contract.
In case of a dispute between one of the Parties and a third party, this Party
shall be solely liable for its own actions or lack of action. There is no joint
or several liability between the Parties according to this Agreement.
9. LAW AND DISPUTE
9.1. APPLICABLE LAW
This Agreement shall be governed by the laws of the Province of Ontario, Canada.
<PAGE>
9.2. COMPLIANCE WITH NATIONAL LAWS
Each Party has controlled and certifies that the provisions of this Agreement
are according to its respective national laws, and do not violate any mandatory
rules of its own country. Legred has particularly controlled the compliance of
the relevant provisions with the existing anti-trust law of the USA. The
professional legal opinion on this compliance has been attached to Appendix 3 of
this Agreement.
Any Party in breach of this clause shall indemnify and hold the other Party
harmless.
9.3 ARBITRATION
All disputes arising out of, or in connection with, this Agreement or further
agreements resulting thereof shall be finally settled by arbitration in
accordance with the Model Law on International Commercial Arbitration of Ontario
(Canada), in English, in Toronto, by a single arbitrator. Unless the Parties
agree on the arbitrator, the arbitrator shall be appointed in accordance with
such law within 30 days from the date of receipt of the request for arbitration
of one of the Parties, sent by registered mail. Unless accepted by the Parties,
the nominated arbitrator shall not be a citizen of Norway, nor of the USA.
This clause shall not limit the right of the Parties to apply for interlocutory
measures, or to exclude an unpaid creditor's right to obtain payment through the
relevant debt recovery procedure.
10. FINAL PROVISIONS
10.1. PREVIOUS AGREEMENTS
This Agreement supersedes any other preceding oral or written agreement between
the Parties.
10.2. INVALID PROVISION
In case one or more provisions of this Agreement are invalid, the validity of
its remaining provisions of the Agreement shall not be affected thereby, unless
the invalid provision is substantial.
The invalid provision shall be substituted by a valid provision which shall be
as close as possible to the business and legal purpose of the invalid provision.
10.3 MODIFICATIONS AND WAIVERS
No modification of this Agreement shall effective unless specifically set forth
in writing in Appendix 2, and signed by both Parties.
No waiver of any right or obligation shall be regarded as a modification of this
Agreement or as a waiver of such a right or obligation, unless specifically set
forth in writing in Appendix 2, and signed by both Parties.
<PAGE>
10.4. FORCE MAJEURE
The Force Majeure (Exemption) clause of the International Chamber of Commerce in
Paris (ICC publication no. 421) is hereby incorporated in this Agreement. Should
a force majeure event remain in effect for more than 12 calendar months, then
this Agreement shall be terminated with one month notice upon request of one of
the Parties.
10.5 PROHIBITION TO ASSIGN
This Agreement cannot be assigned by one Party to a third party without the
prior written consent of the other Party.
10.6 LANGUAGE
The English text of this Agreement shall be the original text.
The original text of any other agreement between the Parties, and contractual
documents, shall be in English. English shall be the working language, and be
used in the correspondence, between the Parties.
11. ENFORCEMENT
All the Appendixes that are attached to this Agreement shall be initialled by
the Parties on the day of signature of this Agreement.
This Agreement shall become effective at the date of its signature.
This Agreement is issued in two originals, one for each Party.
LEGRED GENETICS, INC.
By /s/ Brent Legred Bricely, MN USA, 08 May 1996
------------------------------
Brent Legred, its president
NORSVIN INTERNATIONAL AS, NORSVIN INTERNATIONAL AS
By /s/ Pieter Willem Knap Bricelyn, MN, USA 08 May 1996
------------------------------
Pieter Willem Knap, its technical director
<PAGE>
Norsvin - Legred cooperation agreement
- ------------------------------------------------------------------------------
APPENDIX 1. GENERAL SALES CONDITIONS OF NORSVIN INTERNATIONAL
- ------------------------------------------------------------------------------
1. These conditions apply to all sales of Products rom Norsvin
International AS (hereafter called "Norsvin International") without
exception, and supersede all other previous conditions, unless
specified in Norsvin International's order confirmations or otherwise
agreed in writing between Norsvin International and its customer.
2. Only written order confirmation, or beginning of delivery by Norsvin
International, is binding for Norsvin International. Unless the
customer makes objection by fax at the latest 48 working hours (working
hours: time between 08;00 and 16:00 Central-European Time from Monday
to Friday) after the receipt of the order confirmation, the customer
shall be bound by its contents.
3. The Products shall be delivered according the Norsvin International's
practices unless specific packing, labelling, marking or mean of
transportation are ordered by the customer and accepted by Norsvin
International. Labelling and marking will be according to information
given by the customer and mandatory laws to be specified by the
customer.
4. Pigs are transported according to the IATA rues for live animal
transportation. Fresh semen is delivered at an agreed time and
transported while maintaining a temperature specified by NORSVIN.
5. In the absence of a special condition in the order conformation, the
Products are delivered CIP, extended with insurance coverage against
all risks (AAR) (Incoterms 1990) to an airport specified by the
customer, on the date specified in the order confirmation.
6. Norsvin International shall immediately inform the customer by fax if
it knows that late delivery shall arise, and indicate te period of
delay and the likely new time of delivery. Notwithstanding a reply from
the customer by return by fax and registered letter, the new delivery
time shall be deemed accepted by the customer, without any right for
claiming liquidated damages or any other compensation.
7. Delays due to the carrier, after delivery to the carrier, or delays
related to transportation which are not due to Norsvin International,
do not give the customer the right to cancel the order. If the delivery
of fresh boar semen is delayed by more than 24 hours, the semen costs
will be reimbursed by Norsvin International by means of delivery free
of charge of the same amount and quality of semen in following
shipments. The customer will reimburse Norsvin International or the
transport costs in all cases, as described in clause 10.
8. No damages shall be due to the customer for delay except in case of
Norsvin International's gross negligence or wilful misconduct.
9. Prices are firm at the date of order conformation, and cover the entire
order. Norsvin International's prices are stated in Norwegian Kroner
(NOK).
10. Pigs and semen are sold by Norsvin International to the customer at
Norsvin International's export price, to which are added the real costs
of selection (travel, board and lodging, labour, export compensation),
insurance, veterinary treatment and declarations, transport between
breeding farms and quarantine, quarantine (housing, feed, labour)
transport between quarantine and forwarding airport, packing, customs,
transito and freight between forwarding airport and airport of
destination.
<PAGE>
11. Payment shall be transferred by SWIFT, not later than 21 calendar days
after the date of delivery. The customer shall pay an interest or
overdue payment of 0.05% of the total invoice price per day from the
day the payment is due.
12. Transfer of payments shall be made to Norsvin International's account
no 1800.05.51011 at Sparebanken Hedmark, Postboks 203, 2301 Harnar,
Norway, Swift SHED NO 22.
13. Norsvin International guarantees that the Products are in conformity
with the order conformation.
14. The customer shall inspect the Products on receipt. In case of damage
due to transportation, or delivery of an incorrect quantity or quality,
the customer shall immediately inform Norsvin International by telefax.
15. In case of defective Products due to Norsvin International, the
customer shall immediately inform Norsvin International by telefax. If
the parties should not agree on the claim and on a solution, the
customer shall request a report from the relevant public sanitary
authority and send this report by telefax to Norsvin International. If
requested by Norsvin International, the customer shall keep the
defective Products in stock up to two weeks or freeze samples for
inspection. Any accepted solution shall be confirmed in writing by
Norsvin International.
16. In case of lack of conformity, including defective Products, Norsvin
International's liability shall be limited to the delivery of
substitute Products as soon as possible, and the reimbursement of
expenses regarding sanitary reports, requested stocking and
transportation when defects are due to Norsvin International. This
limitation does not apply in case of gross negligence or willful
misconduct. Norsvin International shall in no case be liable for
consequential damages or indirect loses, such as loss of profit,
business interruption, or loss of production.
17. The customer loses the right to rely on a lack of conformity, including
defective Products, if it does not give Norsvin International notice as
described above and send a written claim at the latest within a period
of fourteen calendar days from the day the defect became apparent.
18. The Force Majeure (Exemption) clause of the International Chamber of
Commerce in Paris (ICC publication no. 421) applies to these
conditions. If a Force Majeure event should prevent the customer from
taking delivery of the Products, and if it has informed Norsvin
International in due time before delivery, it shall be entitled to
cancel the order when there is a risk of loss.
19. These conditions and any related sales agreement shall be governed by
the Convention on Contracts for the International Sale of Products of
1980, supplemented, when insufficient, by Norwegian laws for legal
fields outside the scope of this convention.
<PAGE>
20. In the absence of an amicable settlement, all disputes in connection
with these and any related sales agreement shall be finally settled by
arbitration in accordance with the Rules of the Arbitration Institute
of the Oslo Chamber of Commerce, in English, in Oslo with a single
arbitrator. This provision shall not limit the right of the parties to
apply for interlocutory measures, or exclude Norsvin International's
right to obtain payment through debt recovery procedures.
<PAGE>
Norsvin - Legred cooperation agreement
- ------------------------------------------------------------------------------
APPENDIX 2. MODIFICATIONS AND WAIVERS
- ------------------------------------------------------------------------------
(NORSVIN(TM)-BASED TRADE NAME AND TRADE MARK TO BE AGREED UPON BEFORE 15
JULY 1996)
<PAGE>
Norsvin - Legred cooperation agreement
------------------------------------------------------------------------------
APPENDIX 2. COMPLIANCE OF THIS AGREEMENT WITH THE
ANTI-TRUST LAWS OF THE UNITED STATES OF AMERICA
------------------------------------------------------------------------------
Frundt, Johnson & Roverrud; Ltd.
Attorneys at Law
CHARLES K. FRUNDT 117 WEST 5TH STREET CIVIL TRIAL SPECIALIST
MICHAEL D. JOHNSON P.O. BOX 95 "REAL PROPERTY LAW SPECIALIST
BRIAN D. ROVERUD BLUE EARTH, MN 56013 CERTIFIED BY THE
PHONE (507) 526-2177 MINNESOTA STATE BAR
FAX (507) 526-4477 ASSOCIATION
April 24, 1996
Mr. Brent Legred
3500 490th Avenue
Bricelyn, MN 56014
Dear Mr. Legred:
At your request I have reviewed the proposed cooperation agreement between
Norsvin International AS and Legred Genetics, Inc. My experience is in
agricultural law and I am engaged in general practice in Faribault County,
Minnesota. I am not a specialist in anti-trust laws or corporate monopolies. I
have generally familiarized myself with the provisions of the Sherman Anti-Trust
Act and Minnesota corporate anti-trust law. I did not find anything within the
agreement which would violate the provisions of either Federal or state law. I
would caution bot parties to the agreement on the implementation of the
agreement, particularly in the development of the exploitation plan. You should
keep in mind that the anti-trust laws are designed to prevent monopolistic and
other anti-competitive action. You are, however, entitled to maintain trade
secrets and to develop and market your product in a competitive manner. You
should avoid doing this in a manner that would be designed to minimize or
eliminate competition.
Very truly yours,
FRUNDT, JOHNSON & ROVERUD, LTD.
BY: /s/ Charles Frundt
<PAGE>
EXHIBIT "G"
Total sale $5,000,000.00
Allocation of sales price:
1. Transfer from Legred Genetics, Inc.
a. Norsvin contract $ 5,000.00
b. Accounts receivable $ 1,000.00
c. Cash $ 1,000.00
Total $ 7,000.00
2.Transfer from Legred Genetics --
proprietorship owned by Brent Legred
a. animals:
100 boars $ 540,000.00
300 sows $1,620,000.00
2600 growing pigs $ 260,000.00
Total animals $2,420,000.00
b. machinery $ 69,000.00
c. customer list $ 304,000.00
d. good will $2,000,000.00
3. Transfer from Brent Legred
a. real estate $ 200,000.00
-------------
Total sale allocation of price $5,000,000.00
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment and Assumption of Lease is made as of the 2nd day of
November, 1999, by and between Struthers, Inc., a Nevada corporation
("Assignor") and Legred Struthers Genetics, Inc., a Nevada corporation
("Assignee").
WITNESSETH:
Whereas, Assignee is a wholly owned subsidiary of Assignor; and
Whereas, Assignor desires to assign to Assignee all of Assignor's right,
title and interest in and to that certain Lease dated November 2, 1999, by and
between Assignor, as Tenant, and Bret Legred and Julie Legred as Lessors, for
premises described in Exhibit "A" attached hereto (the "Lease");
Now, therefore, in consideration of the mutual agreements hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each of the parties hereto, Assignor and Assignee do
hereby agree as follows:
1. ASSIGNMENT. Assignor hereby assigns, grants, bargains, sells, conveys,
transfers and sets over unto Assignee, its successors and assigns, as of the
Effective Date (as defined below), all of assignor's right, title and interest
as Tenant in and to the Lease.
2. ASSUMPTION. Assignee hereby accepts the foregoing assignment and, in
consideration thereof, Assignee hereby covenants and agrees that, on and after
the Effective Date, Assignee will assume the lessee's obligations under the
Lease arising and accruing on and after the Effective Date, and will assume
observe, perform, fulfill and be bound by all terms, covenants, conditions and
obligations of the leassee under the Lease which arise and accrue on and after
the Effective Date and are to be observed, performed and fulfilled by the lessee
named therein on and after the Effective Date in the same manner and to the same
extent as if Assignee were the Tenant named therein.
3. INDEMNIFICATION. Assignee hereby indemnifies Assignor, and agrees to
defend and hold harmless Assignor from and against any and all liability, loss,
damage and expense, including without limitation reasonable attorneys' fees,
which Assignor may or shall incur under the Lease by reason of any failure or
alleged failure of Assignee to comply with or to perform, on or after the
Effective Date, all the obligations of the lessee thereunder which are to be
performed on or after the Effective Date. Assignee agrees that the obligations
assumed shall benefit the Lessors named in the Lease as well as Assignor and is
subject to the terms of the Lease by which both Assignee and Assignor agree to
be bound.
4. SUCCESSORS AND ASSIGNS. The terms and conditions of this agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
5. COUNTERPARTS. This Assignment and Assumption of Lease may be executed in
counterparts, each of which will be deemed an original document, but all of
which will constitute a single document.
6. EFFECTIVE DATE. The "Effective Date," as used herein, shall mean
November 2, 1999.
7. AUTHORITY. the contractual authority of the Assignor to enter into this
agreement is set out in Section 10.2 of the Lease.
ASSIGNOR:
STRUTHERS, INC.
BY /s/ DOUGLAS W. BEATTY
---------------------
Douglas W. Beatty, President
ASSIGNEE:
LEGRED STRUTHERS GENETICS, INC.
BY /S/ DOUGLAS W. BEATTY
---------------------
Douglas W. Beatty, President
<PAGE>
MY COMMISSION EXPIRES MARCH 18, 2008
STATE OF SOUTH CAROLINA )
) ss.:
COUNTY OF CHARLESTON )
On the 16th day of December, 1999, before me personally came Douglas W.
Beatty, to me known, who being by me duly sworn, did depose and say that he is
the President of Struthers, Inc., the corporation described in and which
executed the foregoing Assignment and Assumption of Lease agreement and that he
signed his name thereto by order of the Board of Directors of said corporation.
/s/ RHETT SEABROOK
- ------------------
Notary Public
MY COMMISSION EXPIRES MARCH 18, 2008
STATE OF SOUTH CAROLINA )
) ss.:
COUNTY OF CHARLESTON )
On the 16th day of December, 1999, before me personally came Douglas W.
Beatty, to me known, who being by me duly sworn, did depose and say that he is
the President of Legred Struthers Genetics, Inc., the corporation described in
and which executed the foregoing Assignment and Assumption of Lease agreement
and that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ RHETT SEABROOK
- ------------------
Notary Public
3
<PAGE>
EXHIBIT "A"
The Northwest Quarter of the Southwest Quarter of Section Nineteen (19) in
township One Hundred One (101) North, Range Twenty-five (25) West of the Fifth
Principal Meridian in the County of Faribault and State of Minnesota.
A tract commencing at the Southwest corner of the Southwest Quarter of the
Northwest Quarter of said Section Nineteen (19), running thence East 39 rods,
thence North 24 rods, thence West 39 rods, thence South 24 rods to the point of
beginning.
Excepting from the above two tracts the following described premises:
A tract of land in the Southwest Quarter of the Northwest Quarter and the
Northwest Quarter of the Southwest Quarter of Section 19, Township 101
North, Range 25 West in Faribault County, Minnesota described as follows:
Beginning at the Southwest corner of the Northwest Quarter of
Section 19, Township 101 North, Range 25 West in Faribault
County, Minnesota; thence South 0 degrees 00 minutes 00 seconds
West (assumed bearing) along the West line of the Southwest
Quarter a distance of 75.92 feet; thence North 90 degrees 00
minutes 00 seconds East a distance of 503.00 feet to an iron pipe
survey marker; thence North 0 degrees 00 minutes 00 seconds East
a distance of 471.92 feet, more or less, to the North line of the
South 396.00 feet of the Southwest Quarter of the Northwest
Quarter of Section 19; thence Westerly along the North line of
the South 396.00 feet of the Southwest Quarter of the Northwest
Quarter a distance of 503.00 feet to the West line of the
Northwest Quarter; thence South 0 degrees 00 minutes 00 seconds
West along the West line of the Northwest Quarter a distance of
396.00 feet to the point of beginning. Subject to an easement for
public roadway right-of-way along the West line of Section 19.
ARTICLES OF INCORPORATION
OF
LEGRED STRUTHERS GENETICS, INC.
FIRST: The name of the corporation is LEGRED STRUTHERS GENETICS, INC.
SECOND: The registered agent is Paracorp Incorporated. The registered
office of the Corporation shall be located at 318 North Carson Street, Suite
208, Carson City, Nevada, 89701 in Carson City County.
THIRD: The purpose or purposes for which the corporation is organized
are:
The transaction of any or all lawful business for which corporations may
be incorporated under the Nevada Revised Statutes.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 200 common shares all of which shall be without par value.
FIFTH: The corporation shall have one director. The name and post office
address of the director is as follows:
Douglas Beatty
2343 MacLeure Hall Avenue
Charleston, South Carolina 29412
SIXTH: The capital stock is not subject to assessment to pay the debts
of the corporation.
SEVENTH: The period of its duration shall be perpetual.
<PAGE>
EIGHTH: The name and mailing address of the incorporator is:
Lawrence A. Kirsch
90 State Street
Albany, New York 12207
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 20th day of October, 1999.
By: /s/ LAWRENCE A. KIRSCH
----------------------
Lawrence A. Kirsch
Incorporator
STATE OF NEW YORK)
COUNTY OF ALBANY ) SS.:
On the 20th day of October, 1999, personally appeared before me, a notary
public, Lawrence A. Kirsch, personally known to me by the person whose name is
subscribed to the above instrument who acknowledged that he executed the
instrument.
/S/ WENDY J. HENDERSON
----------------------
Notary Public
My Commission Expires:
Wendy J. Henderson
Notary Public, State of New York
No. 01HE5031008
Qualified in Albany County
Commission Expires July 25, 2000
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
LEGRED STRUTHERS GENETICS, INC.
I, Lawrence A. Kirsch, the undersigned incorporator DO HEREBY CERTIFY THAT:
1: They constitute two-thirds of the original incorporators of LEGRED
STRUTHERS GENETICS, INC., a Nevada corporation.
2: The original Articles were filed in the Office of the Secretary of
State on October 21, 1999.
3: As of the date of this certificate, no stock of the corporation has
been issued.
4: They hereby adopt the following amendments to the articles of
incorporation of this corporation:
Article FOURTH is amended to read as follows:
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 20,000 shares with a par value of one cent ($0.01).
Article FIFTH is hereby amended to read as follows:
FIFTH: The corporation shall have not less than three and no more than
five directors. The name and post office address of the directors of the
corporation are as follows:
<PAGE>
Douglas Beatty
2343 MacLeure Hall Avenue
Charleston, South Carolina 29412
Richard Seabrook
1112 Starwood Court
Charleston, South Carolina 29412
Rhett Seabrook
510B East Ashley Avenue
Folly Beach, South Carolina 29439
By: /s/ LAWRENCE A. KIRSCH
----------------------
Lawrence A. Kirsch
Incorporator
STATE OF NEW YORK)
COUNTY OF ALBANY ) SS.:
On the 25th day of October, 1999, personally appeared before me, a notary
public, Lawrence A. Kirsch, personally known to me by the person whose name is
subscribed to the above instrument who acknowledged that he executed the
instrument.
/S/ WENDY J. HENDERSON
----------------------
Notary Public
My Commission Expires:
Wendy J. Henderson
Notary Public, State of New York
No. 01HE5031008
Qualified in Albany County
Commission Expires July 25, 2000
